Call Money
Call rates opened slightly firm on Monday owing demand from banks looking to borrow in excess of their needs. Banks usually borrow in excess of their reserve needs in the first week of the two-week long reporting period to hedge against any sharp rise in the second week. The current reporting period began on Saturday. Call rates did not rise sharply despite the strong demand because liquidity in the banking system has got a boost from the Rs 6,000 crore inflows after the first part of the CRR cut took effect on Saturday. Foreign banks were the main borrowers while state-run banks were the main lenders. Call rates remained rangebound for most of the Monday.

Spot Dollar
The rupee remained largely range-bound on Monday. There was ample supplies from foreign and private banks who offloaded dollars accumulated around the weekend. The weekend supplies were in-turn absorbed by state-run banks. Trade was relatively moderate, with excess dollar supplies being absorbed by state-run banks. The rupee traded in band and the state-run banks were said to be maintaining a tight trading range. Dollar demand from a few banks at regular intervals also helped keep the rupee range-bound. However, persistent dollar demand till close of trades helped the rupee to keep the rupee range-bound. The rupee opened at 47.9825/47.9875 per dollar and closed at 47.9650/47.9700 per dollar. Meanwhile, the RBI fixed its reference rate for the dollar at 47.98 as against its previous fix 47.99. In cross-currency trades, the euro closed at 42.94, while the pound-sterling closed at 69.62.
FORECAST: The rupee seen range-bound Tuesday.

Forward Premiums
Forward dollar premium rose slightly in the longer end owing to a relatively easy call rate. A largely range-bound spot rupee with slight appreciation towards close also helped forward premiums to gain. The annualised six-month and one-year forward premia closed at 6.10% and 6.00% respectively. However, paying interest put some pressure on the near term premiums. Overall, forward premia moved in a tight range. Call remained easy owing to ample liquidity in the banking system on inflows of Rs 6,000 crore after the the first tranche of the CRR cut took effect from Saturday. Call trade in the 6.75-6.90 range for most part of Monday. Long-tenor premiums are seen gaining further owing to easy call rates. In month-wise premiums, November dollar traded at 17/17.5 paise, while in the far forwards, April dollar traded at 143/145 paise with October dollar at 281/283 paise.
FORECAST: Forward premiums seen range-bound Tuesday.

Gilts
Gilts weakened on Monday as players lightened their portfolios on expectation of an auction announcement. Expectations of an auction again resurfaced on the back of Rs 6,000 crore of inflows via the first tranche of the CRR cut which took effect on Saturday. “The underlying sentiment on liquidity was always bullish, now with this CRR cut inflows, liquidity has been boosted and market players feel the RBI may take some step to suck out excess liquidity,” a dealer said. However, gilt prices again started rising on renewed demand at the lower levels. Gilt prices are expected to continue to rally over the next few days with periodic corrections. The NSE’s wholesale debt market saw a trading volume of Rs 3,214 crore. Trades worth Rs 630 crore were seen at the 9.85% 2015 paper, where the 9.81% 2013 and 11.50% 2011A papers amounted to Rs 450 crore and 320 crore respectively.
FORECAST: Prices seen range-bound Tuesday.

— Compiled by Srikesh P Menon