Spot Dollar Gilts Compiled by Raghu Mohan
The rupee ended marginally lower against the dollar at 45.30/31 with state-run banks buying dollar. Opening the day at 45.2850/2950, the rupee rose to 45.26/27 briefly in early trades on robust export and portfolio dollar supplies. But the rupee eased after state-run banks, apparently acting on behalf of the RBI pressed dollar-buys. Despite strong dollar supplies by foreign funds and exporters, the rupee was held in a narrow band with state-run banks mopping up dollars and preventing the rupees gains. The rupee has appreciated around 6% against the dollar since January 1. Foreign funds have pumped about $4.5 billion into the local bourses domestic since January 1. Dollar inflows are seen continuing despite the central banks move to cap non-resident external deposit rates at 25 basis points over Libor. The RBI fixed its reference rate for the dollar at 45.2900, four paise lower from its last fix of 45.3200.
Government security prices fell on profit-selling in late trades ahead of Gilt prices picked up in early trade after interest rates under the rural infrastructure development fund was reduced by 200 basis points. Expectation of a strain in liquidity due to the Rs 5,000 crore auction led to late profit-taking. The 7.27% 2013 ended at Rs 116.85/88, little changed from its overnight close of Rs 116.84/87 after rising to early highs of 117.05/10. The 9.81% 2013 closed at Rs 135.44/45 andthe actively traded 8.07% 2017 finished at Rs 124.85/90. Despite the RBI holding on to key rates in the credit policy, there is a feeling that there is enough liquidity in the system, and fall in gilt ahead of the auction is just temporary. It is felt that governor Reddy will follow Dr Bimal Jalan method of acting outside of the policy in case liquidity turns tight.
FORECAST: Prices seen gaining a tad on Friday.
Compiled by Raghu Mohan