Gilts Dip On Up Poll Outcome, Call Inert

Government security prices fell sharply by 65-70 paise today as the Uttar Pradesh poll results may lead to the finance minister not cutting the small saving rates.

Call rates remained in the 6.60-6.75 per cent range during the day. Government security prices opened 50 paise lower and slipped further by 25-30 paise. The prices recovered in the late hours but remained substantially lower than Friday's closing level.

A dealer with a foreign bank said: "The Uttar Pradesh poll results are a big blow to the Bharatiya Janata Party. After the defeat in the election, the finance minister may not cut small saving rates as it may be an unpopular measure. As the increase in prices over the last couple of weeks have been mainly on expectation of a cut in the savings rate, the possibility of not happening the same affected the prices badly."

 

The Reserve Bank of India today received three bids amounting Rs 138.5 crore at its one-day repo auction. All the bids were accepted at a cut-off of 6.50 per cent. Dealers attributed the low volume of repo bids to the volatility in the government security market.

Government security prices are likely to remain stable tomorrow with a downward bias. The treasury head at a private sector bank: "There was bit of overreaction to the UP poll results today in the morning and that is why there was recovery in the second half of the day. However, the sentiment is weak and hence we expect the prices to go down by 25-30 paise at the long end."

Dealers said the Economic Survey for 2001-02, which will be published by the Central Statistical Organisation tomorrow, may also effect the government security market.

Call rates are likely to remain in the 6.50-6.75 per cent range as the liquidity condition will remain good.