Call rates are likely to remain in the 6.80-7.10 per cent range in the coming week on the back of prevailing easy liquidity condition. Money market dealers said that such condition shall continue during the week as there may not be any big auction during the period.
A dealer said, "Demand in the overnight market is typically high in the very first week of the fortnight, but as all the banks are flooded with deposit there may not be high demand in the market during the week. Hence, overnight rates are likely to be below the seven per cent level for most part of the week."
Call rates were around 6.60-6.80 per cent on Saturday assisted by a Rs 8,500 crore of inflow on account of redemption of 11.75 per cent 2001 security.
A dealer with a private sector bank said, "The demand was thin and there was a huge inflow too. Both of these combined together kept overnight rates below the refinance rate."
Dealers feel that the same phenomenon will be replicated during the week as well.
Though there will not be any major inflow during the week, no big outflow is expected either. A dealer said, "The Reserve Bank of India (RBI) may come out with an auction during the week as the redemption of 11.75 per cent 2001 security might have put some pressure on the central government account. But it will be a small auction in the range of Rs 3,000-5,000 crore and in that case there will be no major impact on the market liquidity and thus keeping overnights below refinance level." But if the central bank decides to come out with a big auction in excess of Rs 8,000 crore, the rates may breach the bank rate of seven per cent. However, in any case the auction will be oversubscribed.
Dealers are expecting even some bid in the repo auction during the week after a long time. A dealer said, "There has been no bid in the repo auction in the last week. But as the liquidity condition has improved after the inflow of Rs 8,500 crore on Saturday, I will not be surprised if there are some bids in the repo auction."
