The rates fell drastically after the RBI repo auction. The Reserve bank of India (RBI) received 36 bids for Rs 21,455 crore at its four-day repo auction. It accepted all the bids at the cut-off price of 5%. Meanwhile, the National Stock Exchange (NSE) pegged its overnight Mibid and Mibor at 4.86% and 5.00% respectively.
FORECAST: Call rates seen steady on Saturday.
The rupee gained a whopping 14 paise on Friday to close at 46.3950/4050 as compared to the overnight level of 46.5350/5450. This is the highest closing level since February 6, 2001. There was heightened corporate dollar sale on expectation of increased dollar flow in the near future due to the widened gap between US and domestic interest rates. The US Federal Reserve has reduced its rate by 25 basis points to 1% while in India, the Reserve Bank of India (RBI ruled out any immediate plan to reduce its key rates. This widened differential will also lead to higher arbitrage, treasury heads said. The rupee opened the day at 46.53/56 and on its northward sojourn throughout the day. The 46.50 mark was a resistance level, but once that was broken there would be more corporate dollar sales, a dealer said. Meanwhile, the RBI fixed its reference rate for dollar at 46.49 as against its previous fix of 46.54.
FORECAST: The rupee seen gaining on Monday.
Forward premiums rose sharply in the morning but came down marginally from their early levels towards the close of the Friday trades. Both the six-month and one-year annualised premiums closed higher at 2.78% (2.69%) and 2.57% (2.55%) respectively. Premiums rose across all maturities but more on the medium term maturities. The expected tightness in the inter-bank liquidity due to the Rs 12,000 crore bond auctions on July 1 put pressure on the premiums. Corporates have shown higher paying interest at the forward segment of the market. But following RBI Governor Bimal Jalans comment that the increased notified amount for the auctions was not to mop up the excess liquidity from the system, premiums fell from their morning levels. In month-wise premiums, the July dollar closed at 12.50/14 paise while in far forwards, the May 2004 dollar closed at 108/110 paise with the June 2004 dollar closing at 118/120 paise.
FORECAST: Premiums seen tight on Monday.
Government security prices closed a shade lower on Friday compared to their overnight level. Prices fell sharply in the morning as an all-round negative sentiment gripped the market following the RBI decision on Thursday evening to hike the notified amounts of the next two borrowing programmes. Prices at medium-term and long-term securities fell by around 30 paise but later recovered from their early losses as RBI Governor Bimal Jalans pacified the market comment by saying that the increased notified amount was not to mop up the excess liquidity from the system. Dr Jalan also stated that even though there would be no immediate rate cut, the stance on the repo rate was still soft. The 9.81% 2013 closed with a yield of 5.7261%, off the mornings 5.7583% and barely changed from the previous close of 5.7279%. At the NSEs wholesale debt segment, trades worth Rs 5,711.39 crore were seen.
FORECAST: Prices seen falling on Saturday.
Compiled by Atmadip Ray