Equity inflows keep Re buoyant

MONEY MARKET ROUND-UP

Forex: RBI intervention continues

The spot rupee opened stronger at 39.84/85 as against a closing of 39.90 to a dollar on Friday. Heavy foreign exchange inflows into the equity market led the market to close 280 points up and this led to an appreciation of rupee as well.

There was panic selling of dollars by exporters who are hedging their near term receivable. This also helped the spot rupee to appreciate, said dealers.

"The Reserve bank of India intervened heavily to purchase dollars and protect the rupee from fast appreciation, said a dealer. The market, very roughly, estimates that the RBI might have bought dollars of around $ 1 billion from the market on Monday.

The RBI intervention is likely to continue on a very aggressive note, added dealers. This is expected on the back of fact that the equity market is slated to receive heavy inflows and so will be sell of dollars by the exporters.

Heavy selling of dollars by exporters in the forward market led to receiving of premium instead of paying. Usually, rupee premiums pegged on spot dollar is paid to book dollars for future.

Money: Call rates ease to 6%

The liquidity situation remained moderate even as the system turned into surplus. On Friday, there was temporary shortage of liquidity in the market since banks refrained from parking funds with the RBI for three days during the weekend.

The RBI had to infuse funds into the market to calm down the call rates that shot up to 8 per cent . Call is the interest rate charged by one bank to another for lending funds for their daily requirements.

The RBI accepted funds of Rs 4,495 crore from the market under reverse repo- the mechanism to absorb excess funds from the market. The call rates closed at 6.15 per cent and rates in the collaterlised lending and borrowing market came down even to 4.10 per cent.

G-sec: Lacklustre

The gilts market remained lacklustre during the day owing to lack of triggers. Prices of government securities remained flat.

"Even though liquidity was improving, there was concern for trading and taking fresh positions just ahead of the end of the second quarter, especially in the volatile interest rate scenario," said a dealer

The yield on the 10-year benchmark paper closed at 7.86 per cent. However the market is of the view that interest rate in the shorter term of three-month to six-month may come down given the expectation of improved liquidity in the system.

The yield on the 91-day and 182-day t- bill came down to 7 per cent and 6.94 per cent from highs of 7.10 per cent and 7.25 per cent last week.

OIS and corporate bonds: Benchmark rates dip

Even as the underlying government securities remained lacklustre, the outlook as reflected from the overnight interest rate swap market is quite bullish.

"The market feels that the interest rate may come down given the improvement in liquidity which is expected to arise through aggressive intervention of RBI in the foreign exchange market to stem rupee appreciation through purchase of dollars", said a dealer .

Therefore, the interest rate in the benchmark maturity of one-year and five-year came down to 6.94 per cent and 7.11 per cent as against 7 per cent and 7.20 per cent last week.

There were few trades in the corporate bonds market, both in the short- and long-term. FTherefore, the banks are waiting to launch their certificate of deposits once the rates fall.

Global market: Dollar loses ground

Dollar lost against most of the currencies globally. Euro and GBP closed at $ 1.4112 ( $ 1.409) and $2.0250 ( $ 2.021). Yen , however lost to dollar by ruling at $ 115.42 ( $ 115.05) .