Market round-up

Updated: Jan 23 2002, 05:30am hrs
Call Money
Call rates continued to remain easy and traded close to its notional floor the Reserve Bank of India’s refinance rate of 6.5 per cent. The ample liquidity in the banking system and steady supplies kept the call rates easy. Demand was relatively moderate, being the reporting week. The terrorists attack on the American Center in Kolkata had little impact on the market. Adequate supplies from lenders managed to keep the call rates from shooting up. There is ample liquidity due to good inflows during the week. Most deals conducted in early trades were done at 6.60-6.70 per cent range. Demand thinned as banks stopped borrowing after they met with their reserve needs. Call rates eased in later trade after demand thinned. Call rates opened at 6.60-6.70 per cent and closed at 6.45-6.60 per cent. Foreign banks were the main borrowers while state-run banks were the main lenders.
FORECAST: Call rates seen range-bound Wednesday.

Spot Dollar
The rupee weakend slightly on Tuesday on the persistent demand from state-run banks and also a few foreign banks. However, good dollar supplies through out the day kept the rupee range-bound. Strong demand after news of the terrorists attacks in Kolkata saw the rupee weaken to an intra-day low of 48.2800/2900 per dollar. The rupee later recovered on the back of good dollar supplies. “Volumes were good but short covering by a few banks kept the rupee in a tight range,” a forex dealer said. Dollar supplies from exporters also helped the rupee gain ground. The rupee had been strengthening over the last few days owing good supplies on the back of exporter dollar sales and steady inflows from foreign funds. Unwinding of long position by banks gave the rupee a further boost. Receding border tension between India and Pakistan gave further support the market sentiment. The rupee closed at 48.2700/2800 per dollar.
FORECAST: The rupee seen range-bound Wednesday.

Forward Premiums
Forward dollar premium remained easy on Tuesday on the back of easy call rates in near term but there was some paying interest due the slight weakness in the rupee. Premiums have been easing rapidly owing to ample liquidity in the system and RBI deputy governor’s statement last Tuesday that the RBI would soon cut the CRR to 3% boosted the market sentiment. Supplies from banks who had stocked up dollars over the weekend also helped keep forward premiums easy. Last week forward premiums had risen after the Indian army general’s statement. However, receding border tensions have helped forward premiums to ease. The annualised six-month and one-year forward premia closed 6.03% and 5.75% respectively. Overall, forward premiums stayed range-bound. In month-wise premiums, January dollar traded at 4.5/5.5 paise, while in the far forwards, April dollar traded at 78/80 paise with Dec dollar at 260/263 paise.
FORECAST: Forward premiums seen easy Wednesday.

Gilts
Gilts trades remained cautious due the news of the terrorists attack on the American Centre in Kolkata. Prices rose briefly owing to the easy call rates but profit-selling seen in intra-day trades saw prices drop. Also the absence of any news news regarding the employees provident fund rate cut also prompted a round of profit-selling. Demand again picked-up due to the underlying bullish sentiment. Ample liquidity in the system prompted good demand from players. “There was no major negative news in the market and hence has provided support for demand to rise,” a dealer said. G-Secs have been on a rise on good demand supported by ample liquidity in the system. On Monday, G-Secs prices risen on rumours of a cut in interest rate on employees provident fund.The sentiment remained bullish on the back of ample liquidity in the system. The market has become stable with the possibility of Indo-Pak war receding.
FORECAST: Prices seen range-bound Wednesday.

Compiled by Srikesh P Menon