Re buoyed by strong equities
MONEY MARKET ROUND-UP
| The spot rupee closed higher at 40.48/49 a dollar, buoyed by the Bombay Stock Exchange (BSE) which ended up by 165 points. The rupee had opened at 40.58 due to the weak Asian markets and dealers were expecting bearishness in the Indian markets. When the BSE went up, institutional investors went short on dollars and long on equity. The resultant inflows perked up the spot rupee. |
| However players refrained from taking positions for the long term since the Federal reserve open market committee is meeting late night to decide on the rate cuts. |
| If the Fed cuts its base rate, the spot rupee will open higher in line with major global currencies. The forward premia continued to rule higher since the rupee liquidity was tight following the advance tax outflows. The six month and one year forward dollars closed at a forward premia of 1.73 per cent and 1.78 per cent as against 1.72 per cent and 1.78 per cent on Monday. |
| Money: Ample Liquidity |
| Even after the outflow towards the advance taxes, there was surplus liquidity in the market. The RBI accepted around 3,300 crore under reverse repo. The call rates, that opened at a high of 7.25 per cent, softened during the day to close at 6.5 per cent after reaching lows of 5.50 per cent. In the collateralised lending and borrowing markets, the banks borrowed funds at 5.50 per cent and volumes were to the tune of Rs 33,500 crore as against Rs 15,000 crore in call money rate. |
| G-sec: Weakness abounds |
| Since the oil prices reached a high of $81 a barrel, the government securities market opened on a bearish note. However during the day, the sentiment improved in the equity market and concerns on liquidity subsided as a result of RBI's reverse repo figures. The prices of government securities moved up by 7-10 paise across maturities. |
| The yield on the ten year benchmark paper closed at 7.85 per cent as against 7.86 per cent on Monday. Yields on the one year treasury bills came off the highs of 7.46 per cent last week to 7.38 per cent. If the Fed cuts the rates on Tuesday, the market may open on a bullish note and prices will rally across maturities, said a dealer. The rally will be much more aggressive if the Fed cuts rates by 50 basis points. However the sentiment may turn bearish if there is no cut. |
| OIS and corporate bonds: Bearish undertone |
| Tracking the government securities market and apprehensions on Fed's moves, the movements in overnight interest rate swap market remained bearish. The OIS (derivatives) market is pegged to the benchmark government security interest rates. |
| There was not much trading in this market. Hence the interest rates on one year and five year maturity remained stagnant at 7.02 per cent and 7.14 per cent as was seen on Monday. |
| The secondary market in both short term and long term corporate bonds witnessed moderate trading. Interest primarily emanated from the mutual funds who remained surplus in cash even after the advance tax outflows. There was brisk trading in two-year NABARD bonds and five year bonds of Power Finance Corporation (NFC). |
| Global markets: |
| Euro, GBP and Yen rallied against the dollar and quoted at $1.3877 ($1.3858) and $1.9970 ($1.9939) and $115.08 ($ 115.83). |