Call rates closed a tad lower at 4.40-4.50 inspite of advance tax outflows.Opening the day at 4.40-4.50%, call rates moved in a narrow band at sub-repos rate level on comfortable liquidity and subdued demand. At close, call rates were seen at its opening quotes. Reflecting the improved liquidity, subscriptions to the Reserve Bank Of India (RBI) repos showed substantial increase. The central bank accepted all 38 repos bids it received for Rs 24,815 crore at 4.5% as against the 36 bids for Rs 13,855 crore on Monday. The outflow number indicates liquidity, and that means there appears enough liquidity as of now, a dealer said. It is not clear at this point in time as to how the advance tax outflow figure of about Rs 8,500 crore will affect the market. The National Stock Exchange pegged its overnight Mibid and Mibor at 4.41% and 4.53% respectively.
FORECAST: Call rates seen holding current levels on Wednesday
The rupee slipped against the dollar on Tuesday after the Reserve Bank of India (RBI) lowered the ceiling on interest offered on non-resident external rupee (NRE) deposits to 100 basis points over Libor. Opening the day at 45.83/84, the rupee touched a low of 45.93 in early trades before recovering partially to 45.84/85 towards noon, five paise weaker than Mondays close of 45.79/80. The RBIs move to lower the ceiling on NRE deposits will discourage arbitrage-driven inflows, a dealer said. In later day trades, the rupee recovered boosted by inflows from foreign funds and exporters. At close, the rupee was seen at 45.8950/90. But dealers say that the rupee may be coming of its bull run, and the redemption of the $5.5 billion Resurgent India Bonds (RIB) bonds in October will give a clear picture. Foreign funds have infused about $2.7 billion into the bourses till date in 2003, up from the $740 million in 2002.
FORECAST: The rupee seen falling on Wednesday.
Forward premiums eased as the cut in non-resident external (NRE) deposit rates fired expectations that the RBI was in favour of lowering the interest rate differentials between the United States and India. The six-month forward opened at an annualised 0.94%, down from the previous close of 1.21%. At close, the rate was at 1.27%. A few importers were seen covering. September maturity dollars were were in short supply, a dealer with a forex brokerage said. The near-month premium for September 2003 closed at 4.5/6.5 paise, October 5/6 paise an November 7/9 paise. In the far forwards, March closed at 29/31 paise, April 35/37 paise and May at 41/42 paise. A few banks did buy-sell swaps. This saw premiums ease. The one-month forward premium eased to an annualised 1.61% from Fridays close of 1.77. There is a feeling that the SBI will be able to hold on atleast $2 bn on the maturity of the $5.5 bn Resurgent India Bonds which matures in October, a dealer said.
FORECAST: Premiums seen rising a tad on Wednesday.
Government security prices recovered after early losses as higher subscriptions to the repos auction propelled fresh buying support. Bond prices which opened weaker by 10-15 paise on liquidity concerns following the lowering the ceiling of interest rate on non-resident external (NRE) deposits, recovered as the increased repo subscriptions eased the liquidity concerns, a dealer said. Bond prices were marginally up by 5-10 paise in the post-trades as compared to their previous closing levels, pulling down yields by 2-3 basis points. The ten-year yield on the 7.27% 2013 was at 5.31%, down from 5.33%. There is a bit of selling especially at the longer end after the new cap on NRE deposits and there is a worry we may see a fund flight on maturity of the Resurgent India Bonds, a dealer at a state-run bank said.
FORECAST: Prices seen falling on Wednesday.
(Compiled by Raghu Mohan)