Calls Seen In 6.50-7% Band

Call money rates will be in the range of 6.50 per cent to 7 per cent on the back of liquidity overhang in the system. The week being the first week of the reporting fortnight, dealers expect the demand for overnight money will be slightly higher than the previous week, but said the liquidity-saddled public sector banks are capable of meeting the requirement.

Said the treasury head of a new private sector bank: "There is little credit off-take even in the fourth quarter. Moreover, there is huge unused export refinance facility available for the banks. This will keep the call rates below the seven per cent level."

Call money rates hovered in the range of 6.50 per cent to 6.75 per cent on Saturday. Said a dealer with a private sector bank: "Saturday being the first day of the reporting fortnight, demand was slightly higher compared with that on Friday, but not enough to push up the overnight rates beyond the 6.75 per cent mark." Dealers said the situation will remain similar during the week as well.

There will be an outflow of Rs 5,000 crore on account of the 15-year paper on Monday. However, there is enough liquidity in the market to absorb the outflow, money market dealers feel.

A primary dealer said: "The repo bid in the last week was on an average to the tune of Rs 10,000 crore per day. This signals how the fluid the market condition is. In a situation like this, the outflow of Rs 5,000 crore will not have much impact on the call money market."

Money market dealers also expect the Reserve Bank of India to continue dollar buying during the week, which in turn will release some more liquidity to the market. Said a dealer with a foreign bank: "Rupee is slightly overvalued against the dollar and to correct that the RBI will intervene through the public sector banks. This operation will keep the overnight rates in a range of 6.50 per cent to 6.50 per cent."