Call Money
Call rates ended easier on Wednesday as demand thinnd 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 current reporting period began on Saturday. The Rs 2,000 crore inflows into the banking system via the second tranche of CRR cut, has helped prevent a sharp rise in the call rates. Call rates eased in later trade after demand thinned. 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 state-run banks were the main lenders. Call rates opened at around 7.00-7.50% and closed at 6.50-6.80%. The NSE pegged its overnight Mibid and Mibor at 7.81% and 8.03% respectively.
FORECAST: Call rates seen range-bound Thursday.

Spot Dollar
The rupee gained ground against the on good dollar inflows. Demand from corporates and other banks thinned banks satrted unwinding dollar positions which in turn improved supplies. Earlier in the day the rupee had weakned to lows of 48.3200 per dollar. Dollar demand from banks has seen the rupee weaken to intra-day lows of 48.3100/3200. PSU bank mopped up dollars which were being offloaded by other banks. The rupee closed at 48.2500/2600. The rupee is expected to remain under pressure owing to the persistent border tensions and what measures India will adopt against Pakistan. The RBI fixed its reference rate for the dollar at 48.31 as against its previous fix 48.24. The rupee weakened against the Euro, opening lower at Rs 43.09/11 per euro, the rupee further dropped to close at Rs 43.42/44 per euro from Tuesday’s close of Rs 42.91/93 per dollar. The RBI fixed its reference rate for the euro at 43.20 as against its previous fix 42.90.
FORECAST: The rupee seen range-bound Thursday.

Forward Premiums
Forward dollar premium remained soft on Wednesday 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 long 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 per cent and 6.15 per cent 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 20/21 paise, while in the far forwards, April dollar traded at 98/99 paise with December dollar at 287/289 paise.
FORECAST: Forward premiums seen range-bound Thursday.

Gilts
Gilts prices remained range-bound for most of Wednesday, with profit-sales and pofit-buying taking turns. Gilt prices had risen on Tuesday owing to improved liquidity in the banking system, from the Rs 2,000 crore inflows via the CRR cut that took effect on Saturday. G-Sec prices had weakaned in early trade but strengthening of the rupee helped demand for G-Secs pick up. Market players had lightened 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, the underlying sentiment on liquidity continues to remain bullish.
FORECAST: Prices seen range-bound Thursday.

— Compiled by Srikesh P Menon