Call Forecast In 6.8-7.1% Slot

Call money rates are likely to remain in the 6.80-7.10 per cent range during the week on the back of easy liquidity in the market. Dealers said the condition will remain unchanged during the week though there may be an auction or open market sale of government securities of Rs 3,000-6,000 crore.

A dealer said, "Demand in the overnight market is typically low in the second week of the fortnight. Moreover as all the banks are flooded with deposits there may not be high demand, but enough liquidity in the market during the week. Hence, the overnight rates are likely to be below the 7 per cent level for most part of the week."

Call rates were in the 6.70-6.90 per cent range on Saturday amid thin demand in the market. A dealer with a private bank said, "The demand was thin as banks and primary dealers were well covered." Dealers feel the same phenomenon will be replicated during the week as well.

Though there will not be any major inflow during the week, no big outflow is expected either. A dealer said, "The Reserve Bank of India (RBI) may come out with an auction during the week. In addition to that as the latest experience shows that the RBI may come out with more open market sale to mop up excess liquidity. However, the outflows will not be huge and there will be enough liquidity to support the overnight rates below the refinance rate of 7 per cent." He said that in any case the auction or the open market sale will get good response as the banks are short of investment opportunities and the government securities are the only option to put their liquidity.

Dealers are expecting the high bids in the repo auction to continue during this week as well. The treasury head of a private bank explained, "There will not be enough demand in the call money market. Given that the banks, particularly the large nationalised banks, will put money in the repo auction." He says the average repo outflow during the week will be of Rs 10,000 crore. Dealers are not expecting any inflow through reverse repo auction.