Call Rates Trapped In 11 Per Cent Range

Opening higher between 10.75 and 11 per cent, calls stayed firm as a number of banks, particularly the foreign banks, panicked in the morning and borrowed funds at high rates. During the course of the day, however, the rates slipped a shade to 9.75 and 10.25 per cent. Discount and Finance House of India (DFHI) and Securities Trading Corporation of India (STCI) were reported to be lending funds at 10.90 per cent.

As a fall-out of the high call rates, trading in the securities market continued to be dull. On the other hand, trading perked up marginally with the13.5-per cent 1997 security being bought by banks for voucher trading since the interest payment for the paper is due on September 1. The Reserve Bank of India's payment to banks towards interest on the security will see some inflows into the banking system.

 

There were a couple of buying enquiries for the 91-day treasury bills, though not many transactions were reported. With the outflows expected to considerably more than the inflows scheduled to take place, the firm trend in the inter-bank money market is likely to persist for some time in the near future.

Dealers said there was little enthusiasm among players for the 10-year paper. They were, as of now, fighting shy of long-term securities.

Other players were credited with the view that the call rates is likely to tighten further in September when the advance tax outflows begin to flow out of the system. The outflow, which usually amounts to Rs 4,000 crore, will usher in a tightening of trend in the money markets.