Call Money
Call rates remained easy around its notional floor—The RBI’s refinance rate of 6.50% on Thursday. Demand was strong in early trade but eased after banks met with their reserve needs. Call rates were easy despite the twin bond auction scheduled for later Monday. Steady supplies from the usual lenders kept call rates easy. Ample liquidity in the banking system was said to be the primary reason for call rates to remain ease. Demand was relatively strong in early trade but thinned towards the end of trades. The current 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. Banks took advantage of the ample supplies and comparatively low rates to meet with their needs. Call rates opened at 6.60-6.70% and closed at 6.50-6.60%.
FORECAST: Call rates seen easy Friday.

Spot Dollar
The rupee gained ground on the back of ample supplies of dollars. Exporter dollar sales was said to be the main sources of dollar inflows along with a few private banks. ICICI Bank was a said to have sold around 60 million worth of dollars in early trade. Earlier the rupee had weakened to 47.9325/9475 owing to strong demand from state-run bank to absorb dollars off the market. Overall, demand for dollar remained thin. Demand for dollars from state-run banks in late trade prevented the rupee from registering a sharp gain. There was periodic demand through out the day. Dollar supplies were steady however, persistent buying of dollars by state-run banks kept the rupee in control. The rupee opened at 47.9300/9400 and closed at 47.8600/8650. Meanwhile, the RBI fixed its reference rate for the dollar at 47.91 as against its previous fix 47.91. In cross-currency trades, the euro closed at 42.41, while the pound-sterling closed at 67.67.
FORECAST: The rupee seen range-bound Friday.

Forward Premiums
Forward dollar premium remained easy owing to thin demand for forward dollars. Overall trade remained easy on the back of easy call and firm rupee. Though the rupee weakened in early trade there was no paying pressure on forwards amid the ample liquidity. The annualised six-month and one-year forward premia closed at 6.15% and 5.90% respectively. Overall, forward premiums remained relatively easy. Call rates have been easy owing to ample liquidity in the banking system. 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, December dollar traded at 18.5/19.5 paise, while in the far forwards, April dollar traded at 115/117 paise with November dollar at 272/274 paise.
FORECAST: Forward premiums seen range-bound Friday.

Gilts
Govt securities prices were range-bound on Thursday with profit-selling and profit-buying taking turns. The Rs 6,000 crore twin bond auctioned on Wednesday seems to have brought about a phase of consolidation in the market. Gilt prices have been on a rally for the past few days owing to the ample liquidity in the banking system. “The market has been range-bound but the underlying sentiment still remains bullish,” a dealer at a private bank said. The profit-selling seen was just a consolidation phase, dealers said.. 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 more steps to suck out excess liquidity and keep control in the market. TheNational Stock Exchange’s (NSE’s)wholesale debt market saw a trading volume of Rs 3,934 crore.
FORECAST: Prices seen range-bound Thursday.

— Compiled by Srikesh P Menon