Inflows To Keep Call At 7-8%

Call rates are expected to be in the 7-8 per cent range this week on back of comfortable liquidity situation. Dealers said the main source of liquidity inflows will be coupon payments, and redemption of government securities and treasury bills. Though the twin auctions of Rs 5,000 crore will put pressure on the fund situation, coupon payments and accretion of bank deposits will help in keeping the rates soft, they said.

Call rates remained in the 7-7.50 per cent band on Saturday, continuing the trend of Thursday and Friday. Dealers said the liquidity condition in the market remained unchanged from the last two days' level and hence call continued to hover around the same range.

A dealer with a new private sector bank said, "The rates will be in the same range (7-7.50 per cent) most part of the week."

As per the scheduled redemption and coupon payments on government securities, inflows worth Rs 2,473 crore is likely. This will, however, be countered by outflows of Rs 1,000 crore on the back of 91-day and 364-day treasury bill auctions, and Rs 5,000 crore owing to the twin auctions on May 29.

Dealers, however, said the auctions will sail through on the back of good liquidity condition. A primary dealer said, "The overnight rates are likely to remain around 7 per cent till the auction. Call rates are likely to tighten up a bit after the auctions, but is not expected to cross 8 per cent mark." He said the growth in deposits during last week is likely to continue in the coming week as well.

A dealer with a nationalised bank said, "The bad stock market condition has prompted some small investors to perk their funds as bank deposits. We expect some more small investors to divert their funds to bank deposits during the week."

Dealers also said that this week being the second week of the reporting fortnight, demand will be low as well. A chief dealer with a private sector bank said, "Demand is generally low in the second week of the fortnight. Moreover, as call rates were low, most of the players have covered their positions, as everybody was expecting an auction announcement and hence demand will be even lower."