The market also had its share of bad news in the form of inflation, which for the week ended July 10 jumped to 6.52 per cent from 6.16 per cent in the preceding week.
Interestingly, both of these led to a spurt in prices. While, market players cheered the first one with renewed buying interests on Wednesday, there was some sense of relief in the market on Friday as inflation, although witnessed a steep rise, was on the expected lines. Market players were expecting inflation in the range of 6.40 per cent and 6.50 per cent. Prices rose 15-20 paise on Friday as compared to their Thursdays levels.
On Friday, G-Secs opened weaker but later attracted buying interests at low levels. The buying spree continued in late trades, which helped the market close higher despite a slight setback in prices just after the release of inflation figure. Medium term papers like the 7.38 per cent 2015 and the 8.09 per cent 2017 rose 15-20 paise from Thursdays levels.
The benchmark 10-year yield on 7.37 per cent 2014 paper, however, closed at 5.94 per cent level, a tad high from Thursdays 5.95 per cent. Prices, however, fell as much as 80 paise on Thursday as the market turned cautious ahead of the release of weekly inflation data. Call rates eased sharply on the reporting
Friday as the cash-strapped public sector banks and mutual funds squared their surplus positions.
The rates closed at 3.00-3.50 per cent. However, for most of week the rates hovered in a tight band of 4.25-4.50 per cent. The week saw inflows of Rs 5,007.79 crore by way of interest payments of dated stocks and redemption of treasury bills. A Rs 2,279.77 crore inflows is lined up for the next week.
All eyes are now on the rupee, which closed the week at 46.33/34 per dollar, a one-year low closing level. The rupee is likely to be under pressure and according to forex dealers, it is almost a certainty now for the rupee to see a 46.50 level next week. Dealers turned jittery with the dollar getting stronger following an improvement in the US economy. The sentiment has been cautious after Mr Greenspans comments that there would be a measured rise in interest rates.
The lack of supply is creating havoc and the dollars overseas gain against other major currencies is not helping either, a dealer with a foreign bank said. The non-deliverable forwards (NDF) market in South-East Asia is attracting a reverse flow of dollars from the Indian market. NDF is offering a higher return of 12/14 paise in near term maturities. This increases the dollar buying spree, a dealer said.
Forward premiums, tracking the spot dollar market, had been under pressure throughout the week. On Friday, both the one-year and six-month annualised premiums closed sharply higher at 1.95 per cent (1.67 per cent on Thursday) and 2.35 per cent (2.05 per cent) respectively.