Call Money
Call rates remained relatively easy on Monday on the bank of good supplies and ample liquidity in the banking system. Call rate remained easy as ample liquidity in the banking 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 meet their reserve needs. Most deals conducted in early trade were done at 6.60-6.80 per cent. “Demand was strong but ample funds were available coupled with good underlying liquidity helped keep the call rates in control,” a dealer at a private bank said. The Rs 1,900 crore inflows into the banking system via coupon redemptions, had helped prevent a sharp rise in the call rates, last week. Call rates eased in later trade after demand thinned. Call rates opened at 6.60-6.80 per cent and closed at 6.50-6.60 per cent. Foreign banks were the main borrowers while state-run banks were the main lenders.
FORECAST: Call rates seen range-bound Tuesday.

Spot Dollar
The rupee gained slightly against the dollar owing to good supplies. Good weekend supplies from foreign banks saw it gain ground to 48.2300/2800. Dealers said ICICI and ICICI Bank sold good amount of dollars in early trade. The dollar supplies were being persistently absorbed by PSU banks believed to be SBI and BOI. The rupee also weakened as good supplies seen in early trade dried up towards close. Persistent strong demand from PSU banks kept the rupee biddish side for most of Monday. It closed 48.2500/2600. It may remain under pressure owing to the persistent border tensions. The RBI fixed reference rate for the dollar at 48.25 as against its previous fix 48.30. The rupee weakened against the euro, opening lower 43.56/58 per euro, the rupee further dropped to close 43.55/57 per euro from Wednesday’s close of 43.42/44 per euro. The RBI fixed reference rate for the euro at 43.31 as against its previous fix 43.44.
FORECAST: The rupee seen range-bound Tuesday.

Forward Premiums
Forward dollar premium continued to remain soft on Monday on the back of easy call rates and a relatively controlled rupee. The rupee weakening in late trade 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 premiums 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 6.10% and 5.90% respectively. Overall, forward premiums remained range-bound. In month-wise premiums, January dollar traded at 16/16.50 paise, while in the far forwards, April dollar traded at 92/93 paise with December dollar at 278/280 paise.
FORECAST: Forward premiums seen range-bound Tuesday.

Gilts
Gilts prices rose slightly but remained range-bound for most of Monday, with profit-sales and profit-buying taking turns. On Friday, trades volumes were thin due to lack of market players owing to the one-day bank strike. “Ample liquidity in the banking system and easy call and controlled forex market continued to keep the underlying market sentiment bullish. A few market players lightened their portfolio because of weak rupee in late trade. “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 Tuesday.

— Compiled by Srikesh P Menon