Prices May Soar On Profit-Booking Drive

Government security prices are likely to stage short rallies during the week on profit-booking.

Dealers said that the cut in the cash reserve ratio (CRR) by the Reserve Bank of India (RBI) will boost the sentiment in the market, but as the players are already overstuffed with government securities auctioned last month, there will be selling pressure at every level.

A primary dealer said, "The sentiment in the market is good despite a high call money rate on the expectation that the RBI will resort to some liquidity easing measure in line with the global trend. But as the dealers already have enough stock of government securities, there may not be any sharp rally."

 

A dealer with a private sector bank said, "The impact of the CRR cut and a possible bank rate cut has already been discounted in the market. Though the prices may rally on Monday, it is expected to come down due to profit-booking."

Dealers are also expecting the RBI to conduct auction of at least Rs 3,000 crore during the week as the ways and means of advances crossed Rs 9,000 crore, which is close to the limit of Rs 10,000 crore.

The treasury head of a private sector bank said, "Though the CRR cut will release Rs 4,500 crore to the market, a major part of it will be sucked away by auctions."