Market round-up

Updated: Jul 30 2002, 05:30am hrs
Call Money
Call remained easy on Monday. Despite the strong demand from banks looking to borrow in excess of their needs, ample liquidity was able to curb any sharp rise in call rates. 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. Outflows towards open market bond sales conducted by the RBI had little impact on call rates. “Along with comfortable liquidity, good supplies throughout the day kept call rates easy,” dealers said. Call opened at 5.65-5.75% and closed unchanged. RBI partially accepted bids worth Rs 14,052 crore of the Rs 17,565 crore it received at its daily repos auctions at a cut-off price of 5.75%. There was no response to the RBI’s reverse-repos auction.
FORECAST: Call rates seen easy on Tuesday.

Spot Dollar
Putting an end to its firm trend seen last week, the rupee weakened sharply. Short covering positions by banks after state-run firms bought dollars to meet routine month-end requirements. Month-end demand has induced some short covering. Besides, the dollar continues to be broadly firm against the yen. Weakness in the dollar overseas also prompted the rupee to weaken in early trades. Last week, persistent inflows from exporters and the ongoing weak trend in the dollar in the overseas market saw the rupee strengthen. State-run banks are believed to be mopping up dollars on the behest of the central bank. The rupee is undervalued by over 5% on a trade-weighted basis given the dollar’s weakness overseas. The rupee had opened at 48.6950 per dollar and ended at 48.7400/7500.
FORECAST: The rupee seen weak on Tuesday.

Forward Premiums
Forward dollar premiums remained relatively steady on Monday. “Though premiums remained steady the undertone was hit by the weakness in rupee,” a dealer at a private bank said. The market felt that the rupee’s weakness is temporary and the rupee may again gain after the month-end demand from state-run companies are over Market players said that there was not much impact on liquidity. Easy call and the huge amount received at the repos has kept the underlying market sentiment bullish. The 6-month annualised forward premium closed lower at 4.42% and 12-month premium closed at 4.53%. Month-wise premium in paise were: August 16/17 paise, September 32.5/34.5 paise and October 52.5/54.5 paise. In the far tenor May premiums was at 182/184 and July was at 221/223.
FORECAST: Forward premiums seen range-bound on Tuesday.

Gilts
Rise in the inflation prompted government securities traders to book profits which led prices to drop in volatile trade. Remarks from the RBI governor Dr Bimal Jalan did not help spur the market sentiment.

“There was nothing new in what Dr Jalan said and hence the market did not react to it,” dealers said. Renewed hopes on a bank rate cut as the country’s economy could be affected by the drought had fuelled the bullish market sentiment, last week. Liquidity continues to remain comfortable and hopes of an open market sales have died down. The good amounts received at the repos auction kept market players bullish that there still is enough liquidity in the banking system. The 8.07% 2017 bond eased to Rs 103.65 from Rs 103.85 in early trade.
FORECAST: G-Secs prices seen range-bound on Tuesday.

Compiled by Srikesh P Menon