Call money rates are likely to hover in a narrow band of 6 per cent to 6.50 per cent favoured by the easy liquidity condition in the market. Dealers said the liquidity comfort is unlikely to be changed in a big way even if there is a possibility that the Reserve Bank of India (RBI) will conduct open market sale of government securities devolved on it or privately placed with it by the Centre.
The coupon payments and redemption of government securities will bring Rs 1,575 crore to the market, which will further ease the liquidity condition. However, in the later part of the week, there will be a strain on liquidity due to the advance tax outflow. In any case, money market dealers do not expect the overnight rates to go over 6.50 per cent.
A senior dealer said: "Being the second week of the fortnight the demand for call money rates will be even lower. We feel most of the banks and the primary dealers have already covered their cash reserve requirement position. In a situation like this, we will not be surprised if the overnight rate drops below the six per cent level on the reporting fortnight."
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Dealers are even expecting the bids in the repo auction will continue to be high. They expect the average daily repo bid to be over Rs 10,000 crore in the absence of any open market operation.
However, if the central bank conducts open operation of Rs 5,000 crore (as expected by the dealers) average bids are likely to come around Rs 8,000 crore.
Call money rates were in the range of 6 per cent to 6.20 per cent on Friday. Dealers said the liquidity comfort with the private and foreign banks improved as they offloaded a part of their government securities. In the three-day repo auction, the Reserve Bank of India received a single bid of Rs 11,000 crore the half of which was accepted at a cut-off rate of six per cent.