Government security prices closed 5-10 paise higher than yesterday's closing as the banking system remain flushed with liquidity. Call rates remained in the range of 6.40-6.65 per cent during the day.
Government security prices opened 10-15 paise higher in the morning. During the day, it appreciated by another 10-15 paise. However, in the last couple of hours, prices came down due to profit-booking.
A primary dealer said, "the sentiment was biddish. But two factors shortened the rally. Firstly, many of the market participants were expecting an auction announcement, and secondly, the prices are already at very high levels and it attracted some of the players to book profit."
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In the call money market, the rates opened in the 6.55-6.65 per cent range. It dipped later and closed around 6.40-6.50 per cent. According to dealers, most of the deals were done around 6.50-6.55 per cent.
A dealer with a private sector bank said, "Liquidity continued to be good, while the demand was low as most of the banks have already covered their cash reserve requirement. This kept call rates around the refinance rate."
In the absence of enough demand, the banks continued to put money in the repo auction which saw high bids. The Reserve Bank of India (RBI) today received 10 bids of Rs 9,130 crore. All the bids were accepted at a cut-off rate of 6.50 per cent. The central bank did not accept any bid for its one-day reverse repo auction.
Government security prices are likely to remain stable tomorrow. Dealers are expecting the prices to open high, but came down later due to profit-booking. Call rates are expected to hover around the repo rate of 6.50 per cent amid thin demand.