Reporting Friday Demand Culls Gilts, Fuels Call

Call rates rose as high as 12 per cent on the back of excess demand before the reporting Friday. Government security prices fell by 20-25 paise on the back of high overnight rate.

Call rates today opened in the 9-9.50 per cent range in the morning, and went up gradually during the day to touch 12 per cent. Overnight rates, however, softened a bit in the closing hours to end the day at 11.50 per cent.

Said a dealer, "There was undercovering of cash reserve ratio requirement by the banks which forced call rates to go beyond the double digit level today. The system is otherwise flushed with liquidity and high call rate is a very temporary phenomenon."

 

The Reserve Bank of India (RBI) today received 43 bids of Rs 9,615 crore for its one-day reverse repo auction of which the central bank accepted 38 bids of Rs 9,525 crore at a cut off rate of 8.50 per cent. The apex bank did not receive any bid for its one-day repo auction.

A dealer with a private sector bank said, "Though the RBI infused liquidity through reverse repo auction it was not enough to bring down call rates."

Government security prices went up by 5-10 paise in the morning following the yesterday trend. Prices, however, came down later to close at 20-25 paise lower than yesterday's closing level.

The treasury head of a private sector bank said, "The sentiment in the market is still upbeat. However, due to the high call rates there was selling pressure which pushed the prices down."

Call rates are likely to remain around 8.50-9.50 per cent tomorrow. Said a dealer with a private sector bank, "It seems that some of the banks are still undiscovered and hence there will be demand pressure even tomorrow."

In the government security market, security prices are likely to remain stable. A senior dealer said, "Two opposing forces will be active in the market. The sentiment will continue to remain good, but the high call rates will prevent any major rally in the market."