Call Edges Up To 7 Per Cent

MONEY MARKET REPORT

The reversal in sentiment, which started on Tuesday on account of the weakening of the rupee, continued yesterday as security prices slipped further by 10-20 paise across the board. The call rate inched up to cross the 7 per cent mark.

Interest rate in the overnight money market opened at 6.0-6.25 per cent and closed higher at 6.75-7 per cent. The call rate saw a high of 7.25 per cent but it may not go much above this level today in spite of outflows as the export refinance rate forms a cap at 7 per cent. No bids were received at the RBI repos yesterday. The increase in forward premiums and intervention by the Reserve Bank of India (RBI) in the forex market yesterday sparked off renewed uncertainty regarding domestic interest rates. "The RBI may come out with measures like hiking the repo rate to 6 per cent to reduce the arbitrage now available between call and forwards," said a dealer. This uncertainty may also have its fall-out at the auction of five-year paper for Rs 3000 crore today.

Security prices fell sharply and volumes dried up towards the afternoon. The 11.55 2001 which saw a high of 100.40 on Tuesday, was dealt at a low of Rs 100.16 yesterday evening. The 11.68 per cent 2002 also came down to Rs 100.18-19 from Rs 100.38 levels. The 12.5 per cent 2004 was traded at Rs 102.53, down from Rs 102.70.