Drop In Call Money Market Rates Expected

Call rate on Saturday was within the range 13.5 to 14.5 per cent. "There were some deals at a higher rate of 15 to 15.5 per cent also", said a primary dealer. The liquidity was scarce as most of the players have invested in RBI's repo auction held on Friday.

On the other hand, being the first day of the reporting fortnight the demand was very high. The demand-supply mis-match pushed up the call rate.

The stringent situation in the call money market on Saturday is likely

to ease down over the present week. Dealers expect that form Monday onwards there will be inflows of liquidity into the system. "Liquidity that has gone out of the system on account of a three day repo auction on Friday will be back in on Monday", said one dealer at a financial institution.

Inflows of liquidity will be on account redemption and coupon payments of government securities as well as redemption of treasury bills.

A total inflow of Rs. 1119.8 crore will come from redemption and coupon payments.

Besides the redemption of 14-day, 91-day and 182-day treasury bills, there will be inflows of Rs. 615.5 crore and Rs. 107.1 crore from the coupon payments of 11.19 per cent 2005 security and 11.00 per cent 2002 state government loans respectively.

The redemption of 8.75 per cent 2000 state government loans will account for Rs. 498.2 crore inflow into the system.

There are some expected outflows from the system on account of 14-day, 91-day and 182-day treasury bill auctions as well. Dealers are expecting no auction of government securities in the week.

There is expectation that the forex market will stabilise and will help in stabilising the call money market. "We hope that RBI's instruction to corporates to bring back the overseas issues on loans will be successful", said a dealer. "

As the rupee is expected to stabilise, we expect a lower repo rate which will bring down the call rate", said one dealer at a foreign bank. Some players even expect that the repo rate for the most part of the next week will be around 11 to 11.5 per cent.

A private sector bank dealer said, "The repo rates will come down gradually over the week". The lower repo rate along with a huge net inflow of liquidities into the system will bring down the call rate.