Call Expected Around 8%

MONEY MARKET

The call rate, with the presence of ample liquidity in the system, is expected to rule in the range of 8-9 per cent during the week. The liquidity is adequate inspite of outflows on account of advance payments.

Around Rs 5,000-6,000 crore is expected to flow out on this account, which may see a slight firming up of call towards the end of the week.

This may be reflected more in the beginning of the next fortnight, when another Rs 3,000 crore goes out on account of the auction of two-year paper by the government. There is also a substantial amount locked up in the Reserve Bank of India (RBI) repos.

On Thursday, the RBI received seven bids for Rs 4,165 crore and on Friday, Rs 1,789 crore went into the repos. This amount will come back today.

Most of the collecting banks for the RIBs have received about 40 per cent of the amount they are eligible for, and the remaining amount will be given out in a phased manner. "The second tranche may not come in before October," said a dealer with a private bank.

This may see a slight tightening in call rate towards the end of the week, said another dealer.

The State Bank of India is understood to be disbursing amounts to the banks based on the figures given to it, and hence some banks have not yet received the first tranche, said sources. Banks, which have received these funds, have immediately used it to bring down their borrowing requirements, which is another reason why the call rate has been at lower levels.

There is expected to be an improvement in prices of government securities during the week, in view of the easy liquidity. There may be a rally by 10-15 paise, said a market player.

However, some offloading is on the cards as banks may make room for the new issue of two-year paper in the next fortnight.

On Saturday, call rate opened at around 8.10 per cent and closed lower at 7.70-7.90 per cent. Prices of short-dated securities in the secondary market rose by 7-10 paise and the 11.55 per cent 2001 was again traded at around par levels.

The zero coupon 2000 was dealt at Rs 81.92. There was, however, a fall in the price of the 11.98 per cent 2004, which was dealt at Rs 99.84 compared to Rs 99.91 levels on Friday. The yield on this paper is likely to align to the 14 per cent 2005 paper, presently being traded at an yield of 12.15 per cent, said a dealer.