Calls Stable, Gilt Rally Continues

Call money rates remained stable in the range of 6.80 per cent to seven per cent on the back of ample liquidity and thin demand in the market.

Meanwhile, government security prices moved up by 25-30 paise at the longer end of the market tracking a stable call money market.

Call money rates opened in the range of 6.95 per cent to seven per cent in the morning, but went down gradually to close in the range of 6.80 per cent to 6.85 per cent.

A primary dealer said, "the market is flushed with liquidity following the coupon payment and redemption of government security. The demand was also low as most of the players have covered their positions before the reporting Friday. Hence the overnight rates remained stable."

Dealers also said the money mopped up by the auction in April has also entered the market and is another reason for liquidity comfort.

The Reserve Bank of India (RBI) today received one bid of Rs 6,500 crore in its one-day repo auction. The apex bank accepted the bid at the cut-off rate of 6.50 per cent. Money market dealers said the bid was from one of the large public sector banks.

Government security prices rallied during the day as the call money rates were stable and the liquidity was ample in the market. Prices at the longer end moved up by 25-30 paise while the prices at the short end increased by 15-20 paise.

The dealer with a private sector bank said: "Even the RBI has given the signal that it is comfortable with the liquidity situation as it reduced the cash reserve ratio and the repo rate in quick succession. This has boosted the sentiment in the market."

Call money rates are likely to dip marginally tomorrow and remain in the range of 6.60 per cent to 6.90 per cent as the demand will be even thinner on the eve of the reporting Friday. Government security prices are likely to continue its rally as the call rates will come down.