Call money rates stayed in the 8.50-9 per cent range despite the reduction in the cash reserve ratio (CRR) effective from May 19. Government security prices at the longer end fell by 10-15 paise.
Call rates opened in the 8.75-9 per cent band and slipped to close in the 8.50-8.75 per cent level.
"Liquidity condition remained unchanged despite the reduction in CRR as the Reserve Bank of India (RBI) had mopped up the liquidity through government security auction on May 17," a dealer said.
Overnight rates came down after the reverse repo auction, through which the central bank lent Rs 2,590 crore. The cut-off rate for the auction and the weighted average of the cut-off rate was 8.75 per cent. The RBI did not receive any bid for the one-day repo auction.
The high call rates kept government security prices within a narrow range. Prices fell in the early trades, but recovered as the expectation of a bank rate cut prevailed.
According to a dealer with a new private sector bank, the sentiment stayed positive on the back of a bank rate cut. However, the oversupply of government securities due to the auctions, kept the prices rangebound, he said.
Prices fell once again in the dying hours as the possibility of the Manipur government's fall emerged. Dealers said at the end of the day the prices were 20 paise down at the longer end, and 5-10 paise down at the medium end.
Call rates are likely to be in the 8.50-9 per cent range tomorrow as there is no sign of improvement to the liquidity condition. Government security prices are expected to move in a narrow band of 10 paise on the back of high call rates.
