Fund situation seen easy

MONEY MARKETS

Global oil prices will determine the movements in the foreign exchange and bond markets this week.

Any hike in the domestic prices of petrol and diesel will increase inflationary pressures.

Domestic fuel prices could go up by as much as Rs 2 per litre, tracing the all-time highs in global prices last week.

In the week ended Mach 5, the inflation rate turned out to be higher than expected.

Any decision by the US Federal Reserve to discard its policy of "measured" hike in interest rates and go in for an aggressive rise in rates will have an impact on the dollar movement.

The rupee will feel the effects in such an event, but the Reserve Bank of India (RBI) is certain to intervene to contain any sharp movements. The week has been shortened by the Good Friday holiday.

The financial system is flush with liquidity with strong inflows from foreign institutional investors.

Outflows of Rs 15,000-20,000 crore through advance tax payments last week are expected to return to the banking system early this week, ensuring the easy liquidity conditions.

Oil prices have persistently remained high of late, shrugging off a 500,000 barrel per day hike in output last week. Another round of identical increase in output failed to subdue prices.

The US light crude was up 30 cents at $56.70 a barrel, while the London Brent was up 34 cents a barrel to $55.40 at close on Friday.

Call rates may ease

Call rates may ease to around 4.75 per cent levels early this week. Advance tax outflows of around Rs 15,000-20,000 crore are expected to flow back into the system which will ease the liquidity pressure, said dealers.

Treasury bill auction

The week will witness an auction of the 91-day treasury bill worth Rs 1,000 crore. The RBI is expected to set a cut-off yield of 5.18-5.20 per cent.

Recap: The inflation rate for the week ended March 5 rose to a higher-than-expected 5.30 per cent, which surprised money market participants. The annual wholesale price inflation rate was at 4.95 per cent last week.

Call rates were traded easy for most part of last week. However, outflows on account of advance tax payments put pressure on the rates. The Interbank rates inched up to an intra-week high of around 5.25 per cent.