Liquidity To Keep Call Rates Steady

Call money rates are expected to remain steady in the range of 6.80 per cent to 7.50 per cent in the coming week on the back of easy liquidity but slightly higher demand in the first week of the fortnight. Dealers said the liquidity crunch that pushed up overnight rates to double digits, is no more there. Overnight rates were in the range of eight per cent to 20 per cent on Friday and Saturday.

A dealer said, "it was the auction of Rs 5,000 crore on Friday that hampered the liquidity in the market a bit. Moreover, as some of the banks have not covered their positions, they had to rush for funds at the very late moment. Had the auction been not conducted just before the reporting Friday, there might not be so much of problem."

Call money rates hovered in the range of seven per cent to 7.50 per cent on Saturday in the midst of high demand in the overnight market. Dealers said though the demand was higher, the liquidity condition improved after the redemption inflow in the later part of the last week, and hence the call rates were lower as compared to Friday's level. Dealers do not expect much change in the overnight rates during this week.

There will not be much redemption inflow during the week. The estimated outflow on account of redemption of government security will be around Rs 58 crore. On the other hand, dealers expect another government security auction of at least Rs 5,000 crore during the week. The chief dealer of a private sector bank said, "the ways and means advances (WMA) continued to remain over the Rs 10,000 crore limit and hence another auction is due." Dealers, however, said the system has enough liquidity to absorb Rs 5,000 crore of auction without hampering the overnight rates. Dealers, neither expect any pressure from the forex market as the rupee is expected to remain rangebound against the greenback.

Dealers, however, said there will be pressure on the overnight rates because of high demand in the first week of the reporting fortnight. A dealer said, "it is the extra demand in the first week of the reporting fortnight that will keep the overnight rates over the refinance rate of seven per cent. Otherwise, the rates would be in the range of 6.50 per cent to seven per cent."