Call Dips, Gilt Prices Edge Up

Call rates opened in the range 14-14.5 per cent in the morning. However, rates fell during the day as the demand was thin. Rates did not rise even after the repo auctions. "There were some stray deals in the 14.25-30 range after the repo auctions," said a dealer. "But it was not the general picture of the market," he added. Most players had reportedly covered their positions in the morning hours.

The Reserve Bank of India (RBI) mopped up Rs 5,830 crore through one-day repo at a cut-off rate of 14.5 per cent and Rs 2,610 crore through three-day repo at a cut-off rate of 15 per cent. The cut-off rates were the same as on Friday.

 

Government security prices moved in tandem with the rupee. In the morning, as the local currency strengthened against the US dollar, security prices went up substantially. Prices later fell as the rupee started weakening in early afternoon deals. However, with the recovery of rupee in the late afternoon, gilt prices moved up a bit. Gilt prices ended 15-20 paise higher than Friday's rates. However, trades were mainly concentrated at the short and medium end.

Call rates are likely to remain ranged between 13.5 per cent and 14 per cent and gilt prices may go up marginally as the liquidity situation will remain easier, at least for a very short period, in the next couple of days following some inflows from the EEFC account. However, dealers are suspicious whether the worst is over as many believe after August 23, the market can face another round of volatility.