Call Money
Call rates remained range-bound on Tuesday despite the Rs 4,000 crore drain via the 9.85%, 2015 auctioned on Monday. Ample liquidity in the banking system was said to be the primary reason for call rates to remain ease. Demand was strong being the start of the new-reporting period. The current two-week long reporting period began on Saturday. The underlying sentiment on liquidity in the banking system has been comfortable which has helped keep the call rates in control. Foreign banks were the main borrowers while state-run banks were the main lenders. The huge Rs 7,260 crore drain via RBI repo also did not have much impact on the call rates. Banks took advantage of the ample supplies and comparatively low rates to meet with their needs. Call rates opened at 6.60-6.80% and closed at 6.60-6.75%. Elsewhere, the National Stock Exchange (NSE) pegged its overnight Mibid and Mibor at 6.62% and 6.78% respectively.
FORECAST: Call rates seen easy Wednesday.

Spot Dollar
The rupee weakened slightly on Tuesday on the back of good persistent demand from state-run banks. Steady dollar supplies from the long Diwali weekend were being consistently absorbed by state-run banks. Light corporate demand early Tuesday was also comfortably met. State-run banks bought dollars aggressively through out the day. Dollar supplies were steady however, persistent buying of dollars by state-run banks kept the rupee in control. Trade was relatively active, with excess dollar supplies being absorbed by state-run banks. The rupee opened at 47.9500/47.9600 per dollar. The rupee closed at 47.9650/9700 per dollar. The rupee touched an intra-day low of 47.9700 per dollar and an intra-day high of 47.9500 per dollar. Meanwhile, the RBI fixed its reference rate for the dollar at 47.97 as against its previous fix 47.97. In cross-currency trades, the euro closed at 42.34, while the pound-sterling closed at 68.05.
FORECAST: The rupee seen range-bound Wednesday.

Forward Premiums
Forward dollar premium eased slighlty in the near end on the back of easy call rates. A relatively steady rupee also helped the forward premiums ease in intra-day trades. The annualised six-month and one-year forward premia closed at 6.25% and 6.20% respectively. Overall, forward premiums remained relatively easy. 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 November 3. Long-tenor premiums are seen range-bound owing to easy call rates.
Also, US interest are expected to reverse its low trend in the near-future reducing the interest rate differential between US and India, this will help premiums ease further. In month-wise premiums, November dollar traded at 4/4.5 paise, while in the far forwards, April dollar traded at 133/134 paise with October dollar at 274/275 paise.
FORECAST: Forward premiums seen range-bound Wednesday.

Gilts
Govt securities continued to rally on the back of strong demand. Despite the 9.85%, 2015, Rs 4,000 crore auction drain. Appreciation in the rupee as well as easy call rates also helped the bond prices to rise. Trade was active amid light profit selling in intra-day trades. Liquidity in the banking system has been largely comfortable since the Rs 6,000 crore inflows after the first part of the CRR cut took effect on November 3. Dealers said 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. The National Stock Exchange’s wholesale debt market saw a trading volume of Rs 6,155 crore. Trades worth Rs 1,700 crore were seen at the 9.85% 2015 paper, where the 11.03% 2012 and 11.50% 2011A papers amounted to Rs 870 crore and Rs 520 crore respectively.
FORECAST: Prices seen firm Wednesday.

— (Compiled by Srikesh P Menon)