PF lift for long gilts, rupee steady, forex kitty soars

RECAP

Long-dated gilts witnessed a smart rally of almost two rupees last week on hopes that provident funds will buy into these securities in January, when they will receive interest payment estimated at Rs 8,000 crore on the special deposit scheme.

In corporate bonds, the IDBI papers were the toast of the market as the Parliament passed the IDBI (Transfer of Undertaking and Repeal) Bill, 2002. Yields on the financial institution's papers came off by almost 25 basis points last week.

Yields on gilts having residual maturity of 15 years and above softened by 10-15 basis points last week.

Ever since the 6.01 per cent 2028 gilt was auctioned about two weeks back, its yield has come off by 22 basis points as compared to auction cut-off of 6.25 per cent.

The benchmark 7.27 per cent 2013 gilt came off by two to three basis points last week and was dealt at 5.13 per cent on Saturday.

The IDBI papers witnessed good trading interest from the market. For example yield on the eight per cent 2018 IDBI paper thawed by 20 basis points to 6.90 per cent last week.

The rupee gained 0.10 percent during the week on the back of lingering weakness of the dollar against major global currencies, mainly the euro, and a steady flow of dollars from foreign institutional investors and expatriates' remittances.

The Indian unit ended the week at a five-week closing high of 45.5050/5150 per dollar as against Monday's close of 45.55/56.

The upward revision of India's foreign currency rating outlook by Standard & Poor's also gave the rupee an upward push.

Global rating agency S&P revised its outlook on India's long-term foreign currency rating from negative to stable on the back of increasing forex reserves.

The rupee has gained by around six per cent in the current calendar year, but was still undervalued on a trade-weighted basis due to the dollar's steep losses against its major global rivals, mainly the euro.

Meanwhile, with yet another record inflow of over $1 billion during the week ending December 12, 2003, India's foreign exchange reserves neared the $100 billion mark. The forex reserves have burgeoned by over $24 billion since March 28, 2003.

For the third time in a month, the country saw an accretion of over $1.4 billion, mainly due to inflows and dollar revaluation, to take the foreign exchange reserves past $98.9 billion.

For the period under review, the country's reserves grew by $1.439 billion taking the outstanding reserves to $ 98.959 billion, the Reserve Bank of India said in its weekly statistical supplement.

The rise in reserves is solely on account of the foreign currency assets jumping up by $1.439 billion to $94.918 billion. The central bank said gold reserves and special drawing rights remained unchanged at $4.038 billion and $3 million, respectively.

The reserve tranche position (RTP) with the International Monetary Fund increased by $9 million to $1.233 billion.

The RTP may change, from time to time, due to India's transactions under financial transaction plan with the IMF.