Market round-up

Updated: Jul 31 2002, 05:30am hrs
Call Money
Comfortable liquidity continued to keep call easy on Tuesday. Demand from banks looking to borrow in excess of their needs was strong. Demand is usually strong at the start of the two-week long reporting period as banks borrow in excess to hedge against volatility in rates. “There is enough liquidity along with good supplies so call may continue to remain easy,” a dealer at a private bank said. Outflows towards open market bond sales conducted by the Reserve Bank of India (RBI )had little impact on call rates. Call opened at 5.65-5.75% and closed unchanged. RBI partially accepted bids worth Rs 17,196 crore of the Rs 21,495 crore it received at its daily repos auctions at a cut-off price of 5.75%. There was no response to its reverse-repos auction.
FORECAST: Call rates seen easy on Wednesday.

Spot Dollar
Strong dollar remittances from exporters saw the rupee firm on Tuesday. “Dollar bids that were seen on Monday were expected to continue on Tuesday also but its did not happen so it prompted unwinding of long-dollar positions,” a forex dealer said. On Monday, the rupee had weakened nearly 0.15% on the back of strong dollar demand from state-run firms which led to building of long positions by market players. A few market players said that the demand was to meet routine month-end requirements. There was not much demand from state-run banks and this allowed the rupee to strengthen. Usually, state-run banks are believed to be mopping up dollars on the behest of the RBI . The rupee is undervalued by over 5% on a trade-weighted basis given the dollar’s weakness overseas. The rupee had opened at 48.7700/7800 per dollar and ended with gains at 48.6850/6950 per dollar.
FORECAST: The rupee seen range-bound on Wednesday.

Forward Premiums
Paying interest by state-run bank saw forward premiums firm in intra-day trades. The strengthening of the rupee also helped keep the underlying market sentiment bullish. On Monday the weak rupee had seen forwards firm slightly. However, market had felt that the rupee’s weakness was temporary and the rupee may again gain after the month-end demand from state-run companies were over. The huge amount received at the repos auction also indicated ample liquidity. The 6-month annualised forward premium closed higher at 4.58% and 12-month premium closed at 4.60%. Month-wise premium in paise were: August 15.5/16 paise, September 32/33 paise and October 52/53 paise. In the far tenor June premiums was at 202/203 and July was at 221/223.
FORECAST: Forward premiums seen range-bound on Wednesday

Gilts
Government securities prices remained relatively flat in late trade as market players awaited the announcement the auction scheduled for August first week.

The Rs 6,000 crore 10-year bond bond may put some pressure on the prices in the medium-term. There is enough liquidity in the market and both bonds are expected to go fully subscribed. In early trade, bond prices has risen slightly as hopes of a bank rate cut again emerged.

The benchmark 10-year bond yield was at 7.32%, little changed from Monday. The 7.40% 2012 bond was dealt at Rs 100.50 in late trade. Liquidity continues to remain comfortable and hopes of an open market sales have died down.
FORECAST: G-Secs prices seen range-bound on Wednesday.

Compiled by Srikesh P Menon