Market Round-Up

Updated: Sep 21 2004, 08:40am hrs
Call Money
Call money ended the day at 4.40-4.60% as against the previous close of 4.75-5.00%. The tightness in liquidity was on account of the quarter basis points (bps) hike in the cash reserve ratio (CRR) becoming effective from the fortnight beginning Sept 18. The CRR now stands at 4.75%. The RBI had recently announced that it will hike the CRR in two-stages hike to 5% in a bid to stem the spiralling inflation. In view of the tight liquidity, some market players sold gilts even as others borrowed funds to stay invested. The RBI received and accepted 26 bids aggregating Rs 9,335 crore at the one-day repo auction conducted, under the liquidity adjustment facility (LAF), at the fixed rate of 4.5%. The RBI received and accepted 12 bids aggregating Rs 3,220 crore at the seven-day repo auction at the fixed rate of 4.5%. It also received and accepted 4 bids aggregating Rs 820 crore at the 14-day repo auction
FORECAST: Call money may tread lower.

Spot Dollar
The rupee ended the day at 45.8750/8850 to the dollar, unchanged from the previous close. Opening at 45.87/89, heavy demand for dollars from the oil companies saw the Indian unit hit an intraday high of 45.9750. At the intraday high, exporters sold dollars. Banks, which had gone long on the dollar, reportedly unwound their long dollar positions.

The rupee-dollar was dealt in the 45.92-96 band for the better part of the day.

Further direction of the rupee will be dictated by the Federal Open Markets Committee (FOMC) meeting, which is scheduled on Tuesday. If the US Federal Reserve decides on hiking the overnight Fed Funds rate, then the rupee will depreciate against the dollar, else it will appreciate.
FORECAST : Rupees direction to be determined by the US Feds decision

Forward Premiums
The rupee premium on the forward dollar ended a tad higher, tracking the spot rupee movement. Importers covered their forward payables through their banks via sell-buy swaps. According to dealers, importers are covering their payables, especially in the far-forward segment i.e. six months to one year. The six and 12 months forwards ended about four paise and seven paise higher respectively, than the previous close. The benchmark six months annualised forward premium ended the day at 1.92% as against last Fridays close of 1.70%. In paise terms, the six months forward premium closed at 39/40 as against the previous close of 35/37. The 12 months forward premium ended the day at 1.65% as against last Fridays close of 1.49%. In paise terms, the 12 months forward premium closed at 71/72 as against the previous close of 63/65.
FORECAST : Forward premiums will track spot rupee movement

Gilts
The government securities market fell by 10-15 paise in early trades as call money came under pressure. However, with the government announcing a lower than expected issuance calendar, gilts recouped the morning losses. The Central Government announced that it will raise Rs 44,000 crore in the second half of this fiscal i.e. from October 1 to March 31, 2005. Yield on the liquid 7.38% 2015 gilt, which is seen replacing the 7.37% 2014 gilt as the new 10 year benchmark, ended the day at 6.15%, unchanged from the previous close, but lower than morning dealt levels of 6.17%. The benchmark 7.37% 2014 gilt ended the day at an yield of 6.16%.
FORECAST : The gilts market will be eyed for the FOMC decision

Compiled by K Ram Kumar