Market Round-Up

Updated: Jan 29 2003, 05:30am hrs
Call Money
Call rates closed at 5.75-6.00%, higher than the previous days 5.50-5.50% level on Tuesday as some banks held back from lending. The trading range for the day was 5.90-6.25 % while most trades were done between 5.90-6.00%. Apprehension over Iraq crisis forced banks from lending in the call market as they preferred to keep cash. The market is eagerly waiting for the statement to be made by the US president George W Bush in response to the report of UN inspectors on weapons of mass destruction in Iraq. A treasury head at a private bank said that liquidity has been tight in the market ever since the OMO conducted earlier and the situation is still under some pressure. RBI mopped up around Rs 2,010 crore at the one-day repo auction today at the cut-off price of 5.50 %, under the Liquidity Adjustment Facility.
FORECAST: Call rates to remain tight on Wednesday

Spot Dollar
The rupee ended firmer on Tuesday. The rupee ended at Rs 47.8825/8900, off the early low of Rs 47.96 and firmer than the previous close of Rs 47.9050/9150. Traders concern over the effect of a US-led war against Iraq on crude oil prices was primarily responsible for the rupee firming. India imports 70% of the crude oil it needs, and the commodity accounts for two-thirds of the countrys annual import bill of nearly $60 billion. Oil prices have risen close to 30% since mid-November on concerns that a war in Iraq could upset supply from the Middle East, while a prolonged strike in Venezuela has curtailed oil production and exports. Dollar inflows were quite steady keeping the trend witnessed in the past few months despite war tremors in West Asia. The rupee has gained 2.4% from its lifetime low of 49.08 in May last year, but analysts said it is still undervalued by nearly 4.5%.
FORECAST: Rupee may soften a bit on Wednesday

Forward Premiums
Forward premiums on the dollar edged up as companies stepped up hedging future payables amid rising fears about a war in the Middle East. Traders said interest rate swaps linked to the forward dollar rose in tandem as traders factored in war risks. Reports about the government decision to prepay a part of its external debt also took the market by surprise and increased the demand for dollar covering by corporates. The six-month forward ended at 3.73%, annualised, up from the previous close of 3.56 per cent. It has risen nearly 50 basis points since last Tuesday. The month-wise premia for the short term were, 0.20/1.20 paise from January, 15/16 paise for Feb and 29/30 paise for March. In the far forwards Oct dollar was at 124/126 paise, Nov dollar was at 135/137 paise and December dollar was at 147/149 paise at the end of the day.
FORECAST: Forward premia to remain firm on Monday

Gilts
G-Sec yield rose on Tuesday for the second consecutive day. The primary reason for the slump in prices was sustained heavy selling due to the Iraqi imbroglio and prices also weighed down by media reports about the governments decision to prepay foreign currency loans through market borrowings.

Papers across maturities were down under hectic selling pressure, ending with sharp declines of over 80-150 paise. 7.40%, 2012 paper opened sharply lower at Rs 109.00 from overnight levels of Rs 109.60, plunged to intraday lows of Rs 108.00, before recovering partly to close at Rs. 108.75/80. The 8.07%, 2017 bond tumbled to Rs 116.35 from Rs 117.35. The 8.35% long-dated paper, maturing in 2022 slumped to Rs 119.43 from Rs 121.05. Whereas the benchmark 10-year 9.81 per cent bond was last dealt at 6.2270%, up from 6.1367 earlier in the afternoon.
FORECAST: G-Sec prices to remain firm on Tuesday

Complied by Abhijit Agrawal