Call ends at 6.35%, Rupee falls to 44.65/$

Mumbai, March 24 | Updated: Mar 25 2006, 05:30am hrs
Indian federal bonds retreated from their highest levels in a month on Friday to end little changed, as the market grew nervous ahead of the governments first half-borrowing calendar due for release after market close. In the event the calendar showed the government planned to borrow a gross Rs 890 billion ($20 billion) in the April-September period, with Rs 180 billion of that set for April.

The market had expected the government to borrow Rs 900 billion gross in the first half, or Rs 570 billion net. The redemption for the period is about Rs 330 billion. Its as expected, said one trader at an Indian bank. The calendar is reasonably well spread out but there will be pressure on interest rates because I dont see appetite for so much.

Others said the amount was lower than some had expected and bonds were likely to take it positively initially on Monday morning. But well have to see whether that will be sustained because its year-end for most of the banks so Im not sure how much buying can be expected, another trader at a foreign bank said. Indias 2005/06 financial year ends on March 31.

The calendar news came after the market closed and the wait took its toll on upbeat sentiment seen in early trade. The yield on the active 8.07 percent 2017 bond eased to 7.36 percent early in the session before ending at 7.3810 percent, little changed from 7.3774 percent on Thursday.

Overnight interbank funding costs stood at 6.35-6.50 percent on Friday, little changed on the day but well below a 3-1/2-year high of 8 % in January. The rupee slid on Friday to close at its lowest level in more than two months on corporate demand for dollars to meet import payments and possible central bank intervention to keep exports competitive.

Traders said state-run banks sold rupees possibly on behalf of central bank to absorb foreign investment flows into the stock market. Oil refiners, which make their import payments towards the end of each month, were active, traders said. India imports 70 percent of its oil. There is continuous demand for dollars. There is demand from oil companies and firms for month-end import orders and not to mention the central bank, said a trader at a private bank.

The partly convertible rupee ended at 44.6550/6650 per dollar, 0.26 percent weaker than Thursdays close of 44.5450/55.