Call Rates, Government Papers Grooved

Market players were expecting a lower cut-off rate in the Reserve Bank of India's (RBI) repo auction and, thus, were holding liquidity in the morning hours before the apex bank conducted the repo auction.

However, the RBI kept the cut-off rate at 14.5 and 15 per cent for the one-day and six-day repo auctions, respectively, same as on Monday. After the repo auctions, call rates came down as people, whose bids were rejected, were interested in lending in the call market. Call rates closed around 13.75 per cent.

"We had expected a lower repo rate, which would push down the call rate more," said a dealer.

The apex bank took out Rs 1,345 crore through the one-day repo at a cut-off of 14.50 per cent and Rs 2,775 crore through the six-day repo at a cut-off of 15 per cent.

Government security prices have moved up earlier as players expected a lower repo rate. "It moved up by 5-10 paise in the morning hours" said a dealer. However, as soon as the prices moved up, large supplies came in pushing the prices to Monday's level.

"Prices fell in afternoon trades as profit-booking took place," said a dealer with a nationalised bank. The trades were, however, concentrated at the short and long end.

Dealers are expecting prices to be range-bound today. "It seems that RBI is not going to cut down the repo rates drastically," said a dealer with a private sector bank.

"With repo rate remaining static, the call rates are likely to remain around 14-14.50 per cent," he added.

Gilt rates are also expected to be range-bound. "Prices are not expected to move more than 5-10 paise as call rates and the rupee are not expected to move drastically," said the treasury head of a private sector bank.