Sentiment: Bullish
Prices of medium-tenor gilts rallied by seven to 15 paise. The benchmark 7.40 per cent 2012 paper, which opened at Rs 101.95 (yield: 7.11 per cent), closed at 7.10 per cent (Rs 102.02).
The driving factors for gilts were easy liquidity, a dip in inflation and the expectation of an aggressive cut-off at today's auction.
The 9.81 per cent 2013 paper moved up by 15 paise as a similar tenor paper is slated to be auctioned today.
Corporate bonds mirrored the bullish trend in gilts. The best-rated five-year Hindalco paper was dealt at a new low yield of seven per cent.
Call money, which opened higher at 7.80 per cent, ended flat at 5.70-5.75 per cent as the RBI rejected 20 per cent of the bids at the repo auction.
There were nine applications aggregating Rs 14,860 crore at the repo auction which were accepted partially for Rs 11,888 crore.
Outlook: The movement in the gilts market will be determined by the cut-off rate to be set at the twin auctions slated to be held today. If the cut-off is as per market expectations then gilts could move up by 10 paise or else they will be range-bound. Call money will rule easy around the repo level.
Forex
Sentiment: Positive
The rupee ended firmer at 48.3550/3625 per dollar compared with Friday's close of 48.3600/3625.
Greenbacks accumulated over the weekend flowed in leading to the appreciation of the rupee, but trading was in a narrow range.
State-owned banks absorbed the dollar supplies and prevented the rupee from breaching the 48.35 mark.
Easy liquidity in the call market and the firmness in the rupee kept forward premiums around four per cent.
Crude prices, which is currently ruling around $30 per barrel, continues to be a cause for concern.
Outlook: The rupee is expected to hover in the 48.35-48.37 band to a dollar. Premiums on the forward dollar will track spot rupee.
