Market Round-Up

Updated: Jul 28 2004, 05:33am hrs
Call Money
Ample liquidity with the inter-bank players saw the call money close at 4.25-4.50%, steady compared to the previous close. Most deals were struck in the 4.25-4.35 per cent band. There was not much demand for call money as major primary dealers (PDs), who fund their positions in the government securities market though borrowings from the call money, chose to stay on the sidelines in the gilts market. That the banking system is awash with liquidity can be gauged from the bids at the Reserve Bank of Indias (RBI) repo window. The central bank received and accepted all the 48 bids aggregating Rs 15,030 crore at its 7-day repo auction. The interbank repo offers an arbitrage opportunity for banks as they can borrow at 3.75-4.00% from mutual funds and park the funds so borrowed at 4.50% at the RBIs repo window.
FORECAST: Call rates seen steady.

Spot Dollar
The rupee gained on Tuesday by around five paise to close at 46.22/24 to the dollar as against the previous close of 46.27/28. Heavy selling saw the rupee touching its intra-day high at 46.15 but the rupee spared its gain in late-deals as corporates were seen covering their short-dollar positions. Opening at 46.26/29, selling pressure triggered off by foreign banks coupled with good trade inflows saw the Indian unit touch 46.22/24 in the first half-an-hour of trading. Importers found the intraday high level attractive and started buying. For the major part of the day the rupee hovered in the 46.25-46.27 band. Its a one-way market. If one bank starts selling, it triggers off a selling wave, said a dealer with a public sector bank. Market players see 46.30 as the resistance level at which the central bank will support the rupee. If it breaks this level then it could weaken to 46.50. Meanwhile, the RBI maintained its reference rate for dollar at 46.27.
FORECAST : The rupee is seen trading in the 46.20-46.25 band.

Forward Premiums
Forward premiums came off a tad on the back of the spot rupee gaining ground against the dollar. Buy-sell swaps saw the benchmark six months premium on the forward dollar edge lower to close at 2.35% (annualised) as against the previous close of 2.37%. The three months forward premium closed at 2.66% (2.72% on Monday) and the 12-months forward ended at 1.86% (1.89%). Trading in the forward segment was dull and rates remained rangebound. With heavy dollar selling by foreign banks, good receiving interest was seen on the forward segment of the market. The mood in the forex market was upbeat with a sizable trade inflows, after a long time. The rupee closed five paise stronger at 46.22/24 per dollar. In month-wise premiums, near term August dollar closed lower at 11/12 paise, while in the far forwards, the June 2005 dollar closed at 82/83 paise with the July 2005 dollar closing at 86/87 paise.
FORECAST: Forwards seen easy on Wednesday.

Gilts
The government securities market witnessed lacklustre trading on account of the twin fears of rise in interest rates and inflation. Prices of gilts closed about 15 paise lower on Tuesday compared to the previous close. Yield on the benchmark 7.37% 2014 paper edged higher to close at 5.944% (Rs 110.40) as against the previous close of 5.927% (Rs 110.53). Yield on the market favourite 7.38% 2015 paper closed at 6.075% (6.059%). Though the 10 year gilt is unlikely to touch the 6% level, fears that further rise in US interest rates could have a cascading effect on domestic interest rates has the market on tenterhooks. Inflation is also a cause for concern, a dealer said, adding: Market players would rather stay on the sidelines than burn their fingers by entering at the current levels. On the NSEs wholesale debt segment, trades worth Rs 2,045.23 crore were seen as against previous days volume of Rs 1,410 crore.
FORECAST: Prices seen rangebound on Wednesday.

Compiled by K Ram Kumar