Gilt Prices May Rise By 50 P To Re1

Government security prices are expected to move up by 50 paise to Re 1 this week. The bullish sentiment will be aided by abundant liquidity, stable rupee, good foreign exchange inflows and easing of the tensions on the Indo-Pak border.

A dealer with a public sector bank said the Reserve Bank of India may announce an auction by the end of the week as the ways-and-means advances (WMA) to the Centre are expected to cross the Rs 6,000 crore mark.

"If one takes into account the Rs 5,000 crore inflow from the auction of the 8.07 per cent 2017 paper on January 14, the WMA level now stands reduced at Rs 4,221 crore compared with Rs 9,221 crore on January 11. However, the government spending is expected to see the WMA breach the Rs 6,000 crore mark, thereby triggering an auction," said the dealer.

Given this situation, the central bank could announce an auction towards the weekend for raising Rs 5,000 to Rs 6,000 crore and this could complete the budgeted borrowing programme for the fiscal 2001-02, he added.

The benchmark 11.03 per cent 10 year (2012) paper, which on Saturday was dealt at Rs 122.85 (yield 7.80 per cent), is expected to perk up to Rs 123.25 level (yield 7.75 per cent) this week.

"Once the yield on the 10 year paper touches the psychological level of 7.75 per cent, it will face resistance. By March, the yield on this paper is expected to touch 7.50 per cent level," said another dealer.

"Wherever there are yield differential opportunities those securities will be cornered," he said, and added that the players who had built up a huge portfolio of long-term securities, and did not expect further appreciation in the prices, could turn their attention to the short-end securities which are less risky.