| |
| A host of factors are responsible for this, starting with the circular on bank investments in unlisted bonds, the lack of clarification on their investment in mutual funds and commercial papers and various indications from the government as well as the Reserve Bank of India (RBI) on curbing inflows which continues to be the major contributor to liquidity overhang in the system. |
| |
| While there are inflows to the extent of around Rs 4,000-odd crore, outflows account for only Rs 1,500 crore. |
| |
| Inflows will be from various coupon redemptions and treasury bill maturities, while outflows would be towards treasury bill auctions. |
| |
| Despite ample liquidity, a positive run will be ensured only if there are some triggers. The market is expecting the RBI to clarify that investments of banks in mutual funds will not be counted under the ceiling of 20 per cent imposed on unlisted bonds. |
| |
| Moreover, they are also expecting the draft guidelines on liquidity adjustment facility to be released, which are likely to incorporate the option of a variable repo rate. |
| |
| Dealers said that variable repo rate will act as an indirect rate signalling mechanism from the central bank. |
| |
Copious cash to keep call easy
|
| |
| The inter-bank call money rates are expected to rule soft as there is a liquidity overhang in the system. |
| |
| Even though the forex inflows have reduced to moderate levels, interventions by the RBI to suck out the excess dollars have been increasing the rupee liquidity in the system. |
| |
| The rupee is being made cheaper in order to make exports competitive, averred a dealer. |
| |
| Some market participants are expecting open market operations (OMOs) to be conducted by the RBI to suck out the excess liquidity this week, while some others do not think so. |
| |
| According to the latter lot, OMOs are unlikely as the trading sentiment in the market is already bearish and buying demand is still to pick up. |
| |
| As far as liquidity management is concerned, the variable repo rate to which the entire market is looking forward to is likely to open additional ways for managing funds at different rates as against the repo rate of 4.5 per cent. |
| |
Treasury bills
|
| |
There are two treasury bill auctions slated for this week
|
