Call Money
Call rates ended easier as demand thinned in late trade. Call rates opened firm on the back of strong demand from banks looking to borrow in excess of their reserve needs, being the start of the new reporting period. The reporting period began on Saturday. A large PSU bank was said to be lending limited funds into the market, taking call rates up. “The Rs 2,000 cr inflows into the banking system via the second tranche of CRR cut, helped prevent a sharp rise in the call rates,” Dealers reported comfortable liquidity in the market, as the system was flush with bank deposits and increased money through the cash reserve ratio cuts, this would help curtail any extremely sharp rise in the call rates. Foreign banks were the main borrowers while PSU banks were the main lenders. Call rates opened at around 7.90-8.00% and closed at 6.75-7.00%. The NSE pegged its overnight Mibid and Mibor at 7.81% and 8.03% respectively.
FORECAST: Call rates seen range-bound Wednesday.

Spot Dollar
The rupee weakened slightly against the dollar on the back of strong demand in late trade. Earlier in the day the rupee had strengthened on the back of good supplies to intra-day highs of 48.1800 per dollar. Later demand from FIIs, corporates and foreign banks saw the rupee weaken sharply to 48.3100/3150 per dollar. Rupee again strengthened slightly on the back of dollar supplies as banks offloaded dollars accumulated over the weekend. However, strong demand from state-run banks kept the rupee weak. . Dollar demand from banks has seen the rupee weaken to intra-day lows of 48.3100/3150. PSU bank mopped up dollars which were being offloaded by other banks. The rupee closed at 48.2600/2700 per dollar. The rupee is expected to remain weak owing to the persistent border tensions and what measures India will adopt against Pakistan. Meanwhile, the RBI fixed its reference rate for the dollar at 48.24 as against its previous fix 48.18.
FORECAST: The rupee seen range-bound Wednesday.

Forward Premiums
Forward dollar premium remained soft on Tuesday on the back of a relatively controlled call rates. The rupee strengthening on the back of strong dollar supplies from banks who had stocked up dollars over the weekend also helped keep forward premiums easy. Weakness in the rupee last week had prompted call rates to rise sharply. The rise in the call rates had put some pressure on the forward premiums but lightened after call rates eased. The annualised six-month and one-year forward premia closed at 6.20% and 6.05% respectively. Overall, forward premiums remained range-bound. Long-tenor premiums are seen volatile due to effects of rising call and movements in the rupee. In month-wise premiums, January dollar traded at 22/23 paise, while in the far forwards, April dollar traded at 99/101 paise with December dollar at 287/289 paise.
FORECAST: Forward premiums seen range-bound Wednesday.

Gilts
Government securities prices rose in early trade owing to improved liquidity in the banking system, from the Rs 2,000 crore inflows via the CRR cut that took effect on Saturday. Strengthening of the rupee also help demand for G-Secs pick up. However, prices dropped as a sharp fall in the rupee in intra-day trades prompted profit-selling. Market players tightened their portfolio because of weak rupee. “Market sentiment has improved considerably with the CRR funds coming in and easing of border tensions, however market players are keeping a close watch on the rupee movements,” a dealer said. Later, market was relatively inactive as market players were awaiting some kind of news regarding the Indo-Pak border tensions. A weak rupee and high call rates had played a negative role in the G-Secs market. However, dealers said the underlying sentiment on liquidity continues to remain bullish.
FORECAST: Prices seen range-bound Wednesday.

— Compiled by Srikesh P Menon