Call Money & Gilts

Sentiment : good

Government security prices darted up by 80 paise to Re 1 at the medium and long ends of the market, driven by liquidity and talks of a bank rate cut.

The rate cut buzz emanated from the stuttering monsoon which is seen delaying industrial recovery.

Dealers also felt that the 75 basis points gap between the bank rate and the repo rate should come down to 50 basis points.

The source of the inflows was the dollar mop up by the RBI.

The response to the repo auction was moderate. The RBI accepted all the five bids received worth Rs 9,905 crore.

Banks did not want to disturb their cash holding on reporting Friday.

Call money rates remained easy in a range of 6.65 per cent to 6.80 per cent due to the liquidity overhang in the system.

Outlook: Government security prices are likely to move up by 20-30 paise in the medium and long tenors. However, there can be profit-booking at higher levels. Call money rates are expected to be in a band of 6.70 per cent to 6.90 per cent.

Sentiment : dull

The rupee remained rangebound as state-owned banks continued to pick up dollars on behalf of the Reserve Bank of India (RBI).

The RBI was seen picking up $150-300 million today.

There were dollar inflows from exporters and foreign investors.

Forward premiums remained rangebound despite the sharp fall in government paper yields.

The steadiness in the forward premium market is due to the dip the US treasury rates.

Outlook: The rupee is likely to open strong on Monday though intra-day movement will depend upon the operations of the RBI. Forward premiums are seen to have bottomed out.