Call Money

Call rates remained relatively easy on Thursday as ample liquidity in the system was able to absorb the strong demand seen in early trade. Call rates opened slightly 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 1,900 crore inflows into thesystem via coupon redemptions, 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 funds through the CRR cuts and redemption of coupons. Four-day call was traded due to the bank strike on Friday. Foreign banks were the main borrowers while PSU banks were the main lenders. Call rates opened around 6.75-7.00% and closed 6.40-6.60%. NSE pegged its overnight Mibid and Mibor at 6.64% and 6.88% respectively.

FORECAST: Call rates seen range-bound Friday.

Spot Dollar

The rupee weakened slightly in late trade owing to strong demand from PSU banks. The rupee also weakened as good supplies seen in early trade dried up towards close of trades. Earlier in the day the rupee had strengthened highs of 48.2300. Dollar demand from state-run banks has seen the rupee weaken in late trade as supplies dried. PSU bank mopped up dollars which were being off loaded by other banks. The rupee closed at 48.2500/2600 per dollar. 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 48.25 as against its previous fix 48.31. The rupee weakened against the Euro, opening lower at 43.56/58 per euro, the rupee further dropped to close at 43.55/57 per euro from Wednesday’s close of 43.42/44 per euro. The RBI fixed its reference rate for the euro at 43.62 as against its previous fix 43.20.

FORECAST: The rupee seen range-bound Friday.

Forward Premiums

Forward dollar premium continued to remain soft on Thursday on the back of a relatively easy 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. The weakening in the rupee in late trade also had little impact on forward premiums. 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 6.00% respectively. Overall, forward premiums remained range-bound. In month-wise premiums, January dollar traded at 18/18.25 paise, while in the far forwards, April dollar traded at 96/97 paise with December dollar at 282/283 paise.

FORECAST: Forward premiums seen range-bound Friday.

Gilts

Government securities prices remained range-bound for most of Wednesday, with profit-sales and profit-buying taking turns. Gilt prices rose slightly owing to improved liquidity in the banking system, from the Rs 1,900 crore inflows via coupon redemptions. G-Sec prices had weakened in early trade but improved sentiment on liquidity helped G-Secs prices pick up. Market players lightened their portfolio because of weak rupee. “Market sentiment has improved considerably with the CRR funds coming in, redemption of coupons 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. However, dealers said the underlying sentiment on liquidity continues to remain bullish.

FORECAST: Prices seen range-bound Friday.

(Compiled by Srikesh P Menon)