Call Likely In 7-7.5% Band

Call money rates are expected to be in the range of 7.0- 7.50 per cent during the week. Money market dealers said the week, being the first half of the reporting fortnight, demand will remain high.

A dealer with a private sector bank said: "Demand in the overnight market is traditionally higher as compared with the second week of the reporting fortnight. This week will also be no exception."

Call rates were in the range of 7.0-7.25 per cent on Saturday. Dealers said demand was higher on the very first day of the reporting fortnight, which caused overnight rates to remain over the bank rate. They said the same phenomenon should be repeated this week as well.

Other dealers, however, said overnight rates may ease down a bit during the week. A dealer with a nationalised bank said: "The market is a bit cautious over the Reserve Bank of India (RBI) deputy governor's comment on the interest rate. However, as there is enough liquidity in the system, overnight rates are likely to soften during the week."

The redemption and coupon payments of government security and treasury bills will bring Rs 2,087.44 crore into the market during the week. However, the liquidity condition may worsen as the RBI is expected to conduct an auction of government securities.

The chief dealer of a private sector bank said: "As the WMA (ways and means advances) figure rose as high as Rs 17,267 crore, we are expecting the central bank to conduct an auction of government securities."

Dealers, however, feel the auction outflow will not put much pressure on the money market as it is flush with liquidity.

The treasury head of a private sector bank said: "Even if there is an auction of Rs 10,000 crore, the system has enough liquidity to absorb that. It may only be reflected in the liquidity adjustment facility auction, where players may turn to the reverse repo window from the repo window." He pointed out that there have been a two bids of Rs 60 crore in the three-day reverse repo auction conducted on Friday.

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 during the week. This may prompt the apex bank to effect a reversal of its interest rate policy.