Reporting Friday Demand Jacks Up Call, Gilts Dive

Government security prices fell by more than a rupee at the long end of the market today following the trend since the beginning of the week. Call rates firmed up and stayed in the range of 7.50-8.00 per cent due to the excess demand ahead of the reporting Friday.

A dealer with a private sector bank said, "The volume of trading was low and a section of market participants resorted to profit-booking. This caused the prices to go down."

Dealers, however, said that the liquidity condition was easy and the sentiment was upbeat. In the call money market, rates opened in the 7.50-7.75 per cent range and touched eight per cent during the day. The rates, however, closed lower around the 7.50 per cent level.

A dealer with a foreign bank said, "A host of banks kept their cash reserve requirement uncovered and rushed for the liquidity today. This was the reason for the higher demand in the market."

The Reserve Bank of India today received six bids of Rs 1,320 crore for its one-day repo auction.

The central bank, however, rejected all the bids. The dealers said that the apex bank move was to stem the rise in call rates and was successful in doing so.

In the government security market, prices are likely to remain stable with a downward bias tomorrow. According to a dealer, "Big players in the market are not trading actively. They have been waiting for the Budget announcement hoping that it will give fresh indication of the direction in which the interest rates should move. That is why the prices have been going down."

In the call money market, dealers feel that overnight rates are likely to open high as some of the banks have still uncovered position. The rates however, are expected to come down during the day and settle in the range of 6.50-6.60 per cent by the end of the day.