Market Round-Up

Updated: Jul 29 2004, 05:51am hrs
Call Money
Call money on Wednesday ended unchanged from the previous days closing level of 4.25-4.50% on the back of surplus liquidity. There was very thin demand for call money. With prices of government securities sliding by over a rupee, primary dealers, who traditionally fund their government security holdings through call money borrowings, preferred not to borrow. That the banking system is awash with liquidity can be gauged from the fact that outstanding repo balances with the Reserve Bank of India stood at Rs 60,235 crore. At the 7-day fixed rate repo auction, the Central bank received and accepted 27 bids aggregating Rs 5,650 crore. It received no bids at the one-day reverse repo auction. RBI also auctioned 91-day treasury bills aggregating Rs 2,000 crroe.

Of this Rs 1,500 crore was sold under the market stabilisation scheme. The yield at the T-bils was maintained at 4.5022% (Rs 98.89).
FORECAST: Call money is seen ruling easy.

Spot Dollar
The rupee weakened by about 9 paise on Wednesday to close at 46.31/32 to the dollar as against the previous days close of 46.22/24. The rupee was under pressure as the greenback strengthened overnight against all global currencies. Heavy month-end demand from importers, especially oil companies, coupled with exporter cancellations compounded the rupees weakness. Further, dollar inflows were also very thin. Opening a tad weaker at 46.27/29, the rupee hit a one-year intra-day low of 46.3950 to the dollar during the course of the day. Exporters resorted to cancelling their forward contracts as the rupee was under pressure. At the intra-day low, foreign banks and nationalised banks sold heavily. Outlook on the rupee is biddish. Dollar demand today outstripped supply, said a dealer, adding that nationalised banks, apparently at the behest of the RBI, sold dollars at higher levels to cap the upside.
FORECAST: The rupee seen in the range of 46.25-46.40

Forward Premiums
The rupee premium on the forward dollar inched up, tracking the weak spot rupee. There was paying pressure in the forward segment of the foreign exchange market as importers panicked and took forward cover to hedge their future payments. Dealers said exporters had already oversold in the forward market. On Wednesday, exporters resorted to cancelling their forward contracts with a view to take advantage of the weakening rupee. The rupee weakened by about 9 paise to close at 46.31/32 per dollar. The six-months annualised forward premium closed the day at 2.50% as against the previous days closing level of 2.38%. The 12-months forward premium finished the day at 1.96% as compared to the previous close of 1.86%. As negative aspects outweigh positive ones, the rupee will come under pressure. This, in turn, will exert pressure in the forward market, said a dealer.
FORECAST: Forward premiums seen edging up.

Gilts
Prices of government securities crashed by about Rs 1.10-1.20 over the previous close. The yield on the benchmark 7.37% 2014 paper breached the 6% mark for the first time this year. The benchmark paper finished the day at an yield of 6.099% (Rs 109.20) as against the previous close of 5.954% (Rs 110.32). A better-than-expected US Consumer Confidence Index data led to fears that the US interest rates may edge up and this could have ripple effect on the domestic interest rates. G-Sec prices opened about 30 paise lower as the US bond yields overnight rose by 10 basis points. In this market everybody, including the fleet footed traders, will be making losses. Banks are trying to sell securities from the available for sale so as to buy them back at lower levels, said a dealer. Primary Dealers are the worst affected as they constantly churn their portfolios
FORECAST: Prices seen falling on Thursday.

Compiled by K Ram Kumar