Calls Seen Easy, Gilts May Rally

Call money rates are expected to rule in the 7.50-8 per cent range for most part of this week on the back of easy liquidity. Government security prices at the medium and the long ends should rally further, provided the Reserve Bank of India (RBI) does not announce any auction.

With the apex bank closing open market operations (OMO) window for the sale of the 11.50 per cent 2011 paper and the 10.25 per cent 2021 g-sec on June 9, players are expecting the liquidity scenario to be comfortable during the week. The RBI placed the securities on OMO sale window on June 6.

 

"Players had covered their positions in the first half of the reporting fortnight (June 4-9) in anticipation of calls perking up next week. But with the RBI closing the OMO sales of gilts, calls will rule steady in the 7.50-8 per cent range at least until the reporting Friday (June 15)," a dealer with a private sector bank said.

The impact of advance tax outflows, which can be anywhere between Rs 8,000-10,000 crore, on Friday (June 15) will be felt on Saturday and the following week as call rates are expected to climb up.

Government security prices at the long end could perk up by 50 paise to one rupee if no auction is announced by the RBI during the week. There would be selling pressure, if there is an auction announcement, a dealer with another private sector bank said. However, prices of short-end securities is likely to stay flat.

On Saturday, call rates eased to 7.40-7.50 per cent level as against the previous close of 7.60-7.80 per cent band as the RBI closed the OMO sales of gilts. The prices at the long-end moved up by 40-50 paise and those at the medium end by 30-40 paise.

Call rates, which ruled steady in the 6.90-7 per cent range on Monday and Tuesday, inched up to 7.20-7.30 per cent on Wednesday. On Thursday and Friday Call rates edged up to 7.30-7.40 per cent and 7.60-7.80 per cent levels, respectively.