Tight liquidity casts shadow, Re at 39.79

MONEY MARKET ROUND-UP

G-sec: Auction fear looms
The government securities market remained lacklustre as auction fear loom large. The tight liquidity condition in the market dampened sentiments further.

The benchmark 10-year paper ended flat at 7.92 per cent. To ease liquidity pressure, the Reserve Bank of India pumped in Rs 3,875 crore into the system through the repo window.

Market participants expect liquidity conditions to tighten further as the RBI will conduct auction worth Rs 5,500 crore on Friday. It will also conduct an auction of government securities worth Rs 7,000 crore between December 7 to 14.

The inflation and data on the country's growth to be released on December 30 will also play a crucial role in defining market sentiments.

Call rates: Close above 7%
The inter-bank borrowing rate ended over the seven per cent mark moving in the range of 7.75-7.85 per cent. Liquidity is expected to remain tight and call rates are expected to hover around 7.70-7.85 per cent.

State and government bond auctions are expected to suck out liquidity in excess of Rs 9,000 crore. While the system is likely to witness net inflow of about Rs 589 crore in the week ending December 1, 2007.

Foreign institutional investors unwinding their positions in the equity market is also making market players wary as this could further impact liquidity.

Rupee: Ends a bit low
The rupee ended the day a tad low at 39.79 to a dollar as against the previous close of 39.76.

The market sentiment is positive as players expect further rate cut in the US, which could trigger flows into the country.

Dollar inflows have seen some moderation as there has been a slowdown in ECBs. The overall liquidity in the global market is also tight and this will have an impact on flows arresting rapid gains in the rupee.

The year-end demand for dollars will continue to arrest any major gain in the rupee. It could hover in the range of 39.45 to 39.70 to a dollar.