Call Likely In 6.75-7.25% Band

Call money rates are expected to stay between 6.75 per cent and 7.25 per cent this week on the back of easy liquidity and soft demand in the second half of the reporting fortnight.

Though the outflow of Rs 7,000 crore on account of the auction conducted on Saturday will put some strain on liquidity in the system, it will not cause overnight rates to rise substantially.

A dealer said: "The demand will be very low as most players are flush with liquidity and have covered their positions in the first week of the reporting fortnight itself. Hence, call rates are likely to remain on the lower side."

Call rates were in the range of 6.60 per cent to 6.80 per cent on Saturday. Dealers said most players have covered for three days on Friday itself and so the demand for funds was very low. "There was very little activity in the overnight money market on Saturday. Borrowers have covered their position on Friday itself and the big lenders stayed aside for the auction," a senior dealer said.

There will be more outflows than inflows in the system this week. The redemption and coupon payments of government security and treasury bills will bring Rs 569.40 crore into the market.

Meanwhile, Saturday's auction of government security and the auction of 91-day and 364-day treasury bills will take out Rs 8,000 crore out from the market. Dealers, however, said the net outflow of Rs 7,430.60 crore is a minuscule amount, given the comfortable liquidity levels in the system.

The treasury head of a private sector bank said: "There is Rs 5,000 crore of unavailed refinance facility, which reflects on the liquidity comfort. Moreover, bids in the repo auction averaged over Rs 10,000 crore in the last three days, implying that some banks are flooded with funds. Hence a net outflow of Rs 7,430.60 crore is not likely to affect overnight rates much."

Dealers feel there will be no further auction during the week. A dealer with a private sector bank said: "Liquidity is ample in the market. Though the ways and means advances figure (Rs 9,014 crore) is very close to the limit of Rs 10,000 crore, it has come down after the auction and, hence, there is little possibility that there will be further auction during the week."

There is not likely to be any pressure from the forex market as well as the rupee is likely to be in a narrow range against dollar this week, which can prompt the apex bank to effect a reversal of the interest rate policy.