This was a turbulent week for the call money market with call rates touching as high as 30% on Friday, which was also the reporting Friday for the banks.  The call rates were high during the entire week because the RBI kept on increasing the cut-off rate for its reverse repo auction and on reporting Friday it didn't accept even a single bid.  A graphical overview of money markets.

June 16th, Friday

Call rates zoomed up today to close in the range of 13-16% in the call market on Friday, after touching a day's high of 30% as the RBI rejected all the bids made for the reverse repo auction. Call rates opened in the range of 10-11.5%, but zoomed up in the light of the RBI move. It was the reporting Friday for the banks and most of the banks had covered their positions by afternoon. With reporting Friday and no acceptance of bids by RBI, this created panic and therefore call rates zoomed up.

June 15th, Thursday

Holiday

June 14th, Wednesday

Call rates continued to rise on Wednesday.  Rates firmed up to close around 10.75-11% in the inter-bank money market, up from Tuesday's close of 10-10.5%. Rates opened firm at 10.5-11% and immediately rose to 11.5%.  The RBI was back in action with its reverse repo auction window open.  But the cut-off rate for repo auctions was higher and keeping it as a benchmark, the call rates also went high. The RBI hiked the cut-off rate for repo auctions to 10.85% as against 9.55% on Tuesday. This hike was the steepest in the recent past. Because the market looks at these rates as a benchmark, call rates were higher. Some stray deals were even reported at 12%

June 13th, Tuesday

Call rates ended the day sharply higher at 10.25-10.50% against their previous close of 9.25 - 9.50% as the RBI further increased the cut-off rate for its reverse repo auction by another 30 basis points. Call rates opened at 10-10.25% and most of the deals were done at the 10% level.  The RBI further hiked its reverse repo auction cut-off rate which forced the operators to cover their open positions in the call market pushing the call rates up. The G-Secs were also affected by this with medium and long term papers shedding 15-20 paise in reaction to this hike.

June 12th, Monday

Call rates ended the day at 9.25-9.50% up from their last week's close of 8.25 - 8.5%.  Call rates opened on Monday at 9-9.50% and immediately firmed up to touch the day's high of 9.75% but later in the afternoon eased back to close at 9.25-9.50% range.  The RBI's reverse repo auction's cut-off rate at 9.25% set the floor for call rates. In the last auction, this cut-off was 9.05%. Due to this 20 basis points hike in, the rates of G-Secs also fell by 5 paise.

Outlook for the next week

In the coming week the monetary conditions shall remain tight like they were during this week and if the RBI doesn't infuse some liquidity in the market through its reverse repo auction, the call rates are expected to rule high in the coming week also.

Rajneesh Mittal