Gilts Spiral Lower On Bearish Hues

MONEY MARKET REPORT

Security prices moved downward yesterday as sentiment turned bearish following the sharp falls in the spot rupee.

Prices fell by as much as 15 paise and dealers expect sentiment to remain weak and dependent on what happens to the dollar rupee rate over the next few trading sessions.

Call money rates continue to remain in a steady range of between 6.95 per cent to 7.10 per cent.

Ample liquidity is still prevalent in the market as is signified by the Rs 3,000 crore repo outflow today. Dealers expect the call money rate to continue at the current levels for the next few days.

 

Sentiment turned negative in the securities market yesterday due to weakness in the rupee dollar rate.

In the long end prices fell by as much as 10-15 paise, while prices in the short end fell by five to ten paise.

Dealers say that sentiment could continue to remain dull as long as the volatility remains in the forex market.

"Most of the players will probably watch the Reserve Bank of India's (RBI) reaction to events in the forex market over the next couple of days. The RBI seems to have signalled that it is comfortable with yesterday's fall in the rupee but nevertheless the market will look out for some more signals," said a dealer with a private bank.

The 12.25 per cent 2010 security was traded at a price of Rs 110.68 underscoring an implicit cut-off yield of 10.50 per cent. In the shorter maturities, the 11.15 per cent 2002 was traded at a price of Rs 103.61 underscoring a cut-off yield of 9.36 per cent.

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Money Market Operations

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* Call/Notice money markets

Banks Primary Non-bank Total Weighted

dealers institutions avg. rate (%)

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Borrowings 12,876 10,580 0 23,456 7.00

Lendings 10,914 2,482 4,274 17,670 7.05

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* Term money markt Volume Rate

1285 7.75-11.50

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* Liquidity support availed from SBI

Tier-I 8926 7%

Tier-II 0 9%

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* RBI's open market operations Nil

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* Outstanding RBI repos 0.00 5.00

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Todays' Market

* Inflows

Coupon on GoI 11 per cent 2002 Rs 162.36 crore

Redemption of 182-day T-bill Rs 100.00 crore

* Outflows

Auction of 182-day T-bill Rs 100.00 crore

Repo Rs 3000 crore

* Expected call rates........ 7-7.10 per cent

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