Crunch likely on low inflows; Re ranged

WEEKLY MONEY & CURRENCIES

Liquidity: May stay tight
Liquidity could continue to remain tight with call rates inching up to around 7 per cent. Call rates could hover in a range of 6 to 7 per cent during the week. The slowdown in foreign capital inflows is helping the central bank in its efforts to keep liquidity in check.

Additionally, the Reserve Bank of India's (RBI) auction of Rs 7,000 crore worth of bonds last week also drained out funds from the system.

This week, the central bank will suck out around Rs 2,500 crore through the auction of treasury bills under the Market Stabilisation Scheme (MSS). The system is likely to witness net inflow of about Rs 589 crore in the week ending December 1.

Foreign funds have been unwinding their positions and fresh inflows are also seeing a slowdown. This has affected the liquidity position in the market.

Traders are wary of a selloff in equity shares by foreign investors. Foreign institutional investors (FIIs) were net sellers of shares worth $209.2 million on November 23.

G-sec: Bullish trend
In the absence of any planned auction for long-term government bonds, including those issued under MSS, the market is expected to see some buying in securities, pushing bond prices slightly higher on Monday.

RBI has announced only its weekly auction of treasury bills. The central bank will auction the 91-day T-bill for Rs 2,000 crore and the 182-day T-bill for Rs 1,500 crore on Wednesday.

Rising crude oil prices may have an adverse impact on the market sentiment.

The 10-year benchmark 7.99 per cent 2017 bond is seen in the band of 7.86-7.87 per cent. It ended at an yield of 7.89 per cent on Friday.

Rupee: Seen stable
The rupee is expected to remain stable in the coming week. It could trade in a wide range of Rs 39.45 to Rs 39.70 to a dollar.

The rupee witnessed major losses last week as investors' demand for dollars shot up, ending the week lower at Rs 39.70 to a dollar. Dollar inflows have seen some moderation as there has been a slowdown in external commercial borrowings (ECBs).

The overall liquidity conditions in the global markets are also tight, which would have an impact on flows, arresting rapid gains in the rupee. However, market participants say that once the market adjusts to the new levels of flows, the rupee would again start strengthening.