The week was fairly stable for the call money market due to ample liquidity in the market. Call rates hardly moved in the first half of the week. In the later half, the RBI introduced repos with more than one day tenure to suck out the excess liquidity from the market to support the falling rupee. These measures put some pressure on the call rates towards the end of the week. Also it was the first week of the new reporting fortnight and there was some demand for funds from the banks to cover the reserve positions. The RBI had announced an auction of State Government loans to be held on August 8^th. Also the market was expecting an auction of G-secs. All this can put some pressure on the call rates in the coming week. The detailed report follows:

Friday, 4^th August

The call rates closed the day sharply higher at 9.5–10% as against its previous close amid outflows of funds towards the daily repo auction of the RBI and liquidity concerns among the operators due to increased borrowing demand for funds. The call rates touched an intra-day high of 10.25% before closing at those levels. The RBI fixed the cut off of 11.5% for its 3 day repo auction and 12% for the 4 days repo auction, which caused the call rates to firm up. The RBI is going to auction State government loans worth Rs. 1220 crores on August 8^th.

Thursday, 3^rd August

Call rates closed marginally higher than their previous close at 8.1 – 8.35% as the RBI introduced repos for more than one day tenure. There was anticipation of introduction of these repos and therefore the call rates opened higher at 8.25% and soon firmed up to 8.40% before closing at this level. The RBI introduced 4 days and 7 days repo today. The cut off for 1 day repo auction was fixed at 8.25%, for 4 days repo auction – 10% and for 7 day repo auction 10%. These high cut offs caused the call rates to firm up. The RBI sucked out around Rs. 4500 crores from the market through these auctions.

Wednesday, 2^nd August

The call rates continued to be steady due to enough liquidity in the market on Wednesday. The call rates opened slightly higher at 8.1 – 8.25%, but as there was enough liquidity to meet whatever demand was there, they came down and closed at their previous levels. There were some stray deals struck at even below 8% towards the end of the day. The market for securities remained subdued due to lack of any buying interest. Most operators stayed away from the market because of the volatility in the forex market and due to expectations of an increase in interest rates.

Tuesday, 1^st August

The call rates continued their steady trend and ended Tuesday at 8.1% due to ample liquidity in the market. Call rates opened higher at 8.15 – 8.30% due to demand for funds in the first week of the reporting fortnight but there was ample liquidity in the market, which fulfilled, whatever demand for funds was there. There were some inflows on account of redemptions of G-secs and coupon payments. The market for G-secs opened on a higher note but soon fell due to volatility in the forex market.

Monday, 31^st July

Call rates ended the day unchanged from their weekend’s close of 8-8.25%, a little above the RBI’s refinance rate amid steady demand for funds at the beginning of the new reporting fortnight. There was ample liquidity in the market, which kept the call rates closer to the refinance rate. The operators were of the view that there were no immediate concerns about the liquidity as the market had already factored in the outflows towards CRR hike and the reduction in the refinance facility from the RBI. The market for G-secs continued to be weak on account of weaker rupee and fears of rise in interest rates. There were also expectations of a fresh auction of G-secs, which further depressed the sentiment in the market.

Rajneesh Mittal