Government security prices fell by 10-20 paise today on border concerns even though liquidity remained comfortable. Call rates remained low and hovered around 6.25 per cent throughout the day.
As there was ample liquidity in the market, the sentiment was good and government security prices went up in the initial hours. But on news that Pakistan was moving more forces towards the border, the prices declined.
A dealer with a private bank said, "Market participants were cautious and the trading volume was low. The bomb blast in Ahmedabad and the news that Pakistan was mobilising troops towards the border has hurt the market sentiment. However, the liquidity condition prevented the prices to fall too much."
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In the one-day repo auction, the Reserve Bank of India (RBI) received three bids of Rs 12,820 crore, which the central bank accepted partially at a cut-off rate of 6 per cent and mopped up Rs 11,538 crore. Dealers said the bids were from the state-run banks.
There was no bid in the one-day reverse repo auction. In the call money market, easy liquidity condition kept the rates soft throughout the day. The overnight rates opened between 6.20 per cent and 6.40 per cent and went down to close in 6-6.20 per cent range. Dealers said the demand for overnight funds was low as most the market participants had covered their positions for the fortnight.
Demand for the call money will be further lower tomorrow as more banks and primary dealers have covered their CRR requirements today. The government security prices may remain stable and the volume is expected to be low as the market participants will keep an eye on the border situation.