The gilts market, which was cautious and rangebound on the first four days of last week, came to life on Friday. Traders took fresh positions to build up stocks to sell this week when banks and mutual funds make fresh purchases at the start of a new quarter.
Anticipation on account of the Rs 7,000-crore auction scheduled to be held any time between October 3 and 8 also buoyed the market. Liquidity was ample throughout the week with call rates hovering in the 5.75-5.80 per cent band. Average bids at the daily repo was Rs 11,361 crore.
The pick up in non-food credit, quarter-end profit booking and the Akshardham temple massacre in Gujarat hung heavy.
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Trading was restricted to medium-tenor securities On the first two days of last week, gilts moved in a narrow five-paise range, but the massacre at Akshardham led securities lower by five paise on Wednesday.
On Thursday, when a nationwide strike was observed to protest against the Gujarat attack, few trades were reported, but some bargain hunting spun the yields southward.
On Friday, the gilts perked up by around 12 paise as traders took fresh positions and, on Saturday, the last day of the second quarter, gilts closed two paise lower due to profit booking.
The benchmark 10-year 7.40 per cent paper, which ended at a yield of 7.17 per cent on Monday, saw a high yield of 7.1820 per cent on Wednesday and closed the week with a 7.16 per cent yield.
On all the trading days the rupee closed below the 48.4050-mark against the US dollar. While demand for the greenback was subdued, inflows were healthy on account of exporter/ non-resident Indian remittances and foreign direct investments. The rupee ended the week at an eight-month closing high of 48.3750/3850 per dollar on Friday, boosted by investments by foreign funds that bought a 16 per cent stake in the country