Call Touches 9.75% Level, Gilts Up 35-40 Paise

Call money rates shot upto to touch 9.75 per cent today as large lenders stayed out of the market and borrowers tried to cover for three days.

The rates, however, cooled off to close in the 7.00-7.25 band compared with the yesterday's close of 7.00-7.10 per cent as the Reserve Bank of India (RBI) pumped in funds through a reverse repo auction.

The liquidity infusion by the RBI, coupled with a stable rupee saw prices of government securities move up by 35 to 40 paise.

The large lenders stayed away from the market ahead of the half-yearly closing of accounts tomorrow. Any lending today would require them to provide for in their books, according money market dealers.

 

The three-day call money cooled off to 7.90-8.10 per cent level, thanks to the RBI conducting the auction after deals were struck at 9.50-9.75 per cent levels.

Dealers pointed out that the market was choppy and borrowers preferred to stay covered for tomorrow and Tuesday, when the market will be closed for the closing of accounts and for a national holiday respectively.

The central bank received 11 applications aggregating Rs 950 crore for the reverse-repo auction held under the liquidity adjustment facility. The central bank accepted 8 bids for Rs 920 crore at a cut-off rate of 8.50 per cent. The net inflow into the banking system was estimated at Rs 1,170 crore.

The government securities prices looked up in the morning but tight call money market conditions pulled the prices down. However, after the auction, the prices rallied again.

The benchmark 11.50 per cent 2011 paper started at Rs 115.85 boosted by the finance minster's comments of softer interest rate regime but was quoted lower at Rs 115.40 as call money rates tightened. The paper recovered to Rs 115.55 on the back of infusion of funds by the RBI.

The call money market will be closed for trade on Saturday, while the government securities prices see some profit-booking at higher levels.