Profit Sales Whittle Down Longer Gilts, Call Staid

Government security prices fell by 10-15 paise at the longer end of the market today due to profit-booking. Call money rates stayed in the 6.50-7.0 per cent range on the back of easy liquidity.

Government security prices opened at yesterday's levels and fell marginally during the day. Dealers said the fall in prices was a correction to yesterday's rise after the auction result.

Said a primary dealer: "Government security prices went up yesterday evening following the good result of the auction. Many market participants booked profits today as yesterday's rise in prices was more than what it should be."

A dealer with a private sector bank said: "Government security prices are already very high. There is little scope for prices to go up further and hence the correction took place."

In the call money market, demand was a little higher and rates opened in the 6.80-7.0 per cent range. Interest rates, however, came down later as the demand petered off. Call rates closed in the 6.40-6.60 per cent range.

The treasury head of a private sector bank said: "Being the first week of the reporting fortnight, demand for overnight money was higher. However, there was enough liquidity in the market to keep call money rates below the seven per cent level."

As there was higher demand in the call money market, only three bids of Rs 360 crore were received in the one-day repo auction. The Reserve Bank of India (RBI) accepted all the bids at a cut-off of 6.50 per cent.

Government security prices are likely to remain stable tomorrow with an upward bias as the liquidity condition is good. Call money rates should be in the range of 6.60 per cent to seven per cent.