Call Money
Call rates remained relatively easy as market expectations of another bank rate cut by the Reserve Bank of India. Hopes of another RBI bank rate cut was because of the 50 basis point cut by Fed in its interest rates. Demand was strong in early trade but soon pittered out. “Banks may have covered their positions in advance as they had lesser days to borrow during the current reporting fortnight,” a dealer at a private bank said. Private and foreign banks were the main borrowers while state-run banks were the main lenders. Ample liquidity in the banking system and adequate supplies were said to be the main reason for call rates to remain easy. The call rate opened at 7.00-7.10% and remained range-bound amid ample supplies. Call rates closed at 6.90-7.00%. Elsewhere, the National Stock Exchange (NSE) pegged its overnight Mibid and Mibor at 6.94% and 7.06% respectively.
FORECAST: Call rates seen range-bound Thursday.

Spot Dollar
The rupee strengthened on the back of good supplies across the board. It opened near to its Monday’s close and good supplies for most of the day helped the rupee appreciate. Players unwound long positions taken on Monday due to concerns of war in 48 hours and also since Tuesday was a holiday supplies were ample. State-run banks were said to be the main sellers. The rupee had weakened sharply on the back of strong dollar demand after news that US retaliation was immanent. Banks had taken long positions on Monday fearing action by the US. The rupee opened 47.97/98 per dollar and gained ground through out the day. The rupee closed at 47.9150/9250 per dollar amid light corporate demand towards the end.Meanwhile, the RBI fixed its reference rate for the dollar at 47.96 as against its previous fix 47.93. In cross-currency trades, the euro closed at 44.06, while the pound-sterling closed at 70.42.
FORECAST: The rupee seen firm Thursday.

Forward Premiums
Forward dollar premium eased on the back of strengthening in the spot rupee. Players unwound long positions which they had taken on Monday following concerns of US retaliation against the September 11 attacks. An easy call rate also helped forward premiums ease. “Banks had taken long positions as market sentiment was hurt following news of an imminent attack in the next 48 hours on Monday, which they unwound today as no attacks were reported,” a dealer said. Easy call rates also indicated that near-term liquidity in the banking system was adequate. Call rates remained range-bound at 6.90-7.10 per cent for most of Wednesday. The benchmark six-month annualised premium closed at 6% while the annualised one-year premium also closed at 6%. In month-wise premiums, October dollar traded at 19.5/20.5 paise, while in the far forwards, January dollar traded at 91/92 paise with September dollar at 278/280 paise.
FORECAST: Forward premiums seen easy Thursday.

Gilts
Gilt prices sentiment improved on hopes of RBI rate cut following the interest rate cut by the US Federal Reserve on Tuesday. Demand was strong. Appreciation in the rupee also helped pick up market sentiment and prompted investments. “There was good demand through out the day for long-tenor securities and this helped the market volumes to improve,” a dealer said. A controlled rupee and easy call rates indicated that the overall sentiment had improved. Trade was choppy on Wednesday with good demand and light profit-sales taking turns. The 11.50% 2011A security rose to Rs 115.60 from its intra-day lows of Rs 114.81. Traded volumes also improved owing to the good demand. On the NSE’s wholesale debt segment, trades worth Rs 3,798 crore were seen. Trades worth Rs 710 crore were seen in 11.03% 2012 paper while 11.50% 2011A paper saw trades worth Rs 695 crore.
FORECAST: Prices seen firm Thursday.

(Compiled by Srikesh P Menon)