Call rates continued to remain easy and traded below its notional floor the Reserve Bank of Indias refinance rate of 6.5 per cent. The ample liquidity in the banking system due to good inflows during the week and steady supplies kept the call rates easy. Demand was relatively moderate, being the reporting week. The reporting day has been shifted to Thursday due to the bank holiday in January 26. Call rates opened slightly above the notional floor but eased as soon as demand thinned. Adequate supplies from lenders managed to keep the call rates from shooting up. Most deals conducted in early trades were done at 6.50-6.60 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 6.45-6.60% and closed at 6.40-6.50 per cent. Foreign banks were the main borrowers while state-run banks were the main lenders.
FORECAST: Call rates seen range-bound Friday.
The rupee weakened slightly on Thursday on the persistent demand from foreign banks. Standard Chartered Bank was said to be actively buying dollars of the market for most of the day. State-run banks offered little support to curb the fall in the rupee. State-run banks did not pump in dollars aggressively, and allowed the dollar to weaken. State-run banks only offered dollars to restrict any sharp volatility, a forex dealer said. Standard Chartered Bank is believed to be buying dollars on account of the payment it has to make to National Housing Bank over their protracted dispute involving Rs 1,552 crore. Persistent dollar demand and short-covering saw the rupee weaken to an intra-day lows of 48.3400/3500 per dollar. Volumes were good but short covering by a few banks kept the rupee in a tight range. Lack of dollar supplies from state-run banks also put pressure on the rupee. The rupee closed at 48.3450 per dollar.
FORECAST: The rupee seen weak Friday.
Forward dollar premium remained easy on Thursday 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 banking system and persistent selling in the market. 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 generals statement. However, receding border tensions have helped forward premiums to ease. The annualised six-month and one-year forward premia closed at 5.97per cent and 5.76 per cent respectively. Overall, forward premiums remained range-bound. In month-wise premiums, January dollar traded at 1.5/2.0 paise, while in the far forwards, April dollar traded at 75/75.5 paise with December dollar at 255/256 paise.
FORECAST: Forward premiums seen easy Friday.
Prices in government securities held rangebound on Thursday. The benchmark 10-year yield was held stable at 7.77% level. Prices rose in the morning session but the early gains erased in the afternoon trades on profit booking. Prices at the 11.50% 2011A and 9.85% 2015 paper closed more or less unchanged at Rs 125.26 and Rs 115.56 respectively. Market sentiment continued to remain bullish as there was ample liquidity in the system and that prompted good demand from the players. The RBI accepted three bids to mop up a meagre Rs 675 crore from the system. At the NSEs wholesale debt market, trades worth Rs 3,081 crore were seen. Trades worth Rs 620 were seen at 9.85% 2015 and Rs 540 crore were seen at the 11.50% 2011A, while the 9.81% 2013 and the 11.03% 2012 were amounted to Rs 390 crore and Rs 305 crore respectively.
FORECAST: Prices seen range-bound Friday
(Compiled by Srikesh P Menon)