Insipid Fund Demand Will Keep Call Calm

Call money rates are expected to remain steady in the range of 6.80 per cent to 7.10 per cent this week on the back of lower demand in the second week of the reporting fortnight.

Dealers said banks and primary dealers have covered their positions for the fortnight in the first week itself.

A dealer with a private sector bank said: "There will be no drastic change in the liquidity scenario, but the week being the second of the reporting fortnight, the demand will be on the lower side."

A senior dealer added: "Though there is no chance of the Reserve Bank of India (RBI) taking any liquidity-easing measures in the near future, the market is flush with liquidity because of huge deposit mobilisations by commercial banks. Overnight rates are likely to hover between the repo rate and the bank rate on the back of such liquidity."

Call rates were in the range of 6.80 per cent to seven per cent on Saturday in thin trade. A dealer with a private sector bank said: "Call rates have been soft in the last two days and the same trend continued on Saturday."

"This will be the nature of the overnight market even during the week," he added.

Redemption and coupon payments of government securities and treasury bills will bring around Rs 6,000 crore into the system during the week. These will, however, be countered by an auction of government securities.

The chief dealer of a private sector bank said: "Though the ways and means advances (WMA) came down, it is still more than Rs 10,000 crore. This is likely to force the Reserve Bank of India to conduct an auction during the week." Most players said there will be auction of at least Rs 5,000 crore in this week.

Dealers, however, said that the market has enough liquidity to absorb the auction and it will not have a major impact on overnight rates.

However, a dealer said there may not be an auction in the first half of the week. "The central government may not require to mop up funds from the market due to the dividend payments it has received from public sector companies."

As dealers feel the rupee will be range-bound, there will not be any pressure on call rates from that front as well.