Call rates in the inter-bank money market ended at 6.10-6.20%. The Reserve Bank of India absorbed Rs 4,970 crore through its first reverse repo auction on Tuesday and another Rs 4365 crore through its second reverse repo auction.
Meanwhile, the domestic currency lost ground against the dollar on Tuesday after data showing a rising trade deficit and falling share prices renewed questions about the countrys ability to finance its trade gap. Indias trade deficit more than doubled to $6.21 billion in October from a year earlier as demand for imports in the worlds second-fastest-growing major economy outstripped exports.
The rupee closed at 44.68/44.69, weaker than a previous close of 44.655/665. As per JP Morgan, the outsized trade deficit in October will refocus investor attention on Indias current account deficit and its funding, despite the resilience of capital inflows, especially portfolio investment, JP Morgan expects the current account gap to widen to 1.8 percent of GDP in 2006/07 from 1.3% in 2005/06. In the forward market, premias ended higher, with the six month annualised premia closing at 2.06% on Tuesday as compared to 1.95% on Monday.