Call Money
Call trades remained relatively thin on Friday due the one-day banking employees strike called by All India Bank Employees Association (AIBEA). Stary deals were done in the 6.60-6.70%. On Thursday call rate remained easy as ample liquidity in the system was able to absorb the strong demand seen in early trade. Call rates had 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 the system via coupon redemptions, had 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 cash reserve ratio cuts and redemption of coupons. Foreign banks were the main borrowers while state-run banks were the main lenders.
FORECAST: Call rates seen range-bound Saturday.

Spot Dollar
The rupee weakened slightly in late trade owing to strong demand from state-run banks. The rupee also weakened as good supplies seen in early trade dried up towards close of trades. Supplies from foreign banks were persistently being absorbed by state-run. The rupee weakened to intra-day lows of 48.3000/3100 per dollar. Dollar demand from state-run banks has seen the rupee weaken in late trade as supplies dried. The rupee closed at 48.2600/2700 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 48.30 as against its previous fix 48.25. The rupee gained against the Euro, opening higher at 43.33/35 per euro, the rupee further rose to close at 43.35/37 per euro from Thursday’s close of 43.55/57 per euro. The RBI fixed its reference rate for the euro at 43.44 as against its previous fix 43.62.
FORECAST: The rupee seen range-bound Monday.

Forward Premiums
Forward dollar premium continued to remain soft on Friday on the back of a thin call trades due to the bank strike. The rupee weakening had little impact on forward premiums. 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 premuims amid thin trade. 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 6.12% and 5.95% respectively. Overall, forward premiums remained range-bound. In month-wise premiums, January dollar traded at 17.25/17.75 paise, while in the far forwards, April dollar traded at 93/94 paise with December dollar at 280/281 paise.
FORECAST: Forward premiums seen range-bound Monday.

Gilts
Government securities prices remained range-bound for most of Friday, with profit-sales and profit-buying taking turns. Trades volumes were thin due to lack of market players owing to the one-day bank strike. On Thursday, gilt prices rose slightly owing to improved liquidity in the banking system, from the Rs 1,900 crore inflows via coupon redemptions. A few 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 Saturday.

— Compiled by Srikesh P Menon