Call Money
Call rates continued to remain a tad above its notional floor—the RBI’s 7% refinance rate on the back of strong early demand Wednesday. Supplies remained adequate through out the day to curb any sharp rise in the call rates. However, call rates eased a bit as demand thinned in late trade amid ample supplies. Demand was strong, which is typical being the the first half of the new reporting period which on began Saturday. In early trade supplies were available but at a higher price, but lenders were forced to lower their rates as demand reduced towards close of trades. Foreign and private banks were said to be the main borrowers while state-run banks were the main lenders. Call rates opened at 7.00-7.20% and remained within the same range for most of Wednesday. However, call rates eased a bit to close at 7.00-7.15%. Elsewhere, the NSE pegged its overnight Mibid and Mibor at 7.08% and 7.24% respectively.
FORECAST: Call rates seen range-bound on Thursday.

Spot Dollar
The rupee ended at a new all-time low against the dollar of 47.4300 on Tuesday on wide-spread long dollar demand from banks and corporates. The rupee opened at 47.4800/5000 and weakened to 47.5200 on panic buying of the greenback amid concerns after a terrorist attack in the US on Tuesday dented the market sentiment. Later support from a large state-run bank at higher levels helped the rupee recover to 47.4150/4300. The Indian currency closed at 47.4300 with support from the central bank continuing. Remarks from the central bank governor and union finance minister also did not impact the market much. The intra-day low was 47.5200 while the intra-day high was 47.4150. Meanwhile, the RBI fixed its reference rate for the dollar at 47.43 as against its previous fix 47.45. In cross-currency trades, the euro closed at 42.94, while the pound-sterling closed at 69.50.
FORECAST: The rupee seen weak on Thursday.

Forward Premiums
Forward dollar premia moved sharply up owing to heavy inter-bank and corporate demand for forward dollars. Banks paid interest thorough out the day and premiums hardened across all tenors. The activity in the forward market reflected the negative sentiment that
prevailed markets across the world after the terrorist attack in the US. The fall in the US interest rates after the attacks depressed sentiment in the local forwards market. Premiums hardened because of demand for forward dollars by banks across all tenors. The benchmark six-month annualised premium closed at 4.85 per cent while the annualised one-year premium also closed at 5.10per cent. In month-wise premiums, September dollar traded at 9.00/9.25 paise, while in the far forwards, January dollar traded at 85/86 paise with August dollar at 228/230 paise.
FORECAST: Forward premiums seen higher on Thursday.

Gilts
Gilt prices dipped in early trade as an initial reaction to the news of the terrorist attack in US. “Prices recovered briefly in mid-day trades as market players took support from the fact the call rates were steady,” a dealer at a broking firm said. After remaining range-bound for sometime GoI-Secs prices started dipping again as the market became a bit uncertain of the future. Trade was choppy with bargain-buying and profit-sales taking turns. Prices were seen gaining over the past few weeks amidst ample liquidity and following assurance from the RBI that bias on softer interest rate will continue. Gilt prices had been weakening over the past few days owing to concerns over the rupee’s fall and also traders expected liquidity to tighten following the auction. . Trades worth Rs 934 crore were seen in the 9.40% 2012, while those in 11.50% 2011A paper and 11.03% 2012 amounted to Rs 490 crore and Rs 580 crore respectively.
FORECAST: Prices seen range-bound Thursday.

(Compiled by Srikesh P Menon)