Price Correction Likely

The debt market is likely to witness a correction in the prices of the securities as the repo auction to be held by the Reserve Bank of India will soak funds to the tune of Rs 2,000 crores.

The central bank has decided to hold a repo auction on Tuesday to stem the free fall in the yields on securities.

With call rates likely to climb 4-5 per cent this week, bankers are of the view that the securities will continue to be actively traded. Banks will pick up securities in the debt market as the calls will remain low, a treasury head with a foreign bank said.

Dealers are of the view that the nationalised, foreign and private sector banks will be booking profits this week.

Foreign banks, especially, are aggressively into the market and are booking profits by trading in securities, a dealer said. Meanwhile, the blue chip corporates are busy entering the commercial paper market as raising resources through the this route has become cost effective .

Money market operators said the paper is now proving to be attractive to banks also. Commercial papers will offer a better rate than the other papers, a banker said.