Early Rally Presaged

Government security prices are likely to go up by 25-35 paise at the medium-to-long end, followed by profit-booking in the later half of the week. Dealers said, though the liquidity condition is good, the fiscal pump-priming and the absence of any liquidity-easing measure in the last two months will have their impact in the second half of the week.

Trading in government securities was dull on Saturday, on the eve of the twin auction worth Rs 7,000 crore. Prices at the medium end dipped by 10-15 paise for most papers as players were not keen on taking positions before the auction.

A dealer with a private sector bank said: "Players were waiting for the auction cut-off as it will give some indication of the future market trend." Dealers, however, said that the 9.81 per cent 2013 (the paper auctioned on Monday) was traded heavily.

Though there will be a net outflow of Rs 7,400 crore this week, it will be made up by softer call money rates. The treasury head of a private sector bank said: "There is no problem on the liquidity front. But, as most papers are already oversold, there will be profit-booking after a brief rally."

Dealers, however, are not expecting any auction in the week. A dealer said: "Though the latest data shows that the ways and means advances figure is very close to the limit, after Saturday's auction, it should have come down."

"Even if there is auction, given the liquidity comfort in the market, it should be oversubscribed," he added.