Financial Daily from THE HINDU group of publications
Tuesday, Dec 27, 2005
Financial Daily from THE HINDU group of publications Tuesday, Dec 27, 2005 |
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Financial Markets Money & Banking - Short Term Instruments Markets - Stock Markets Call rates rise on liquidity tightness — Sensex nosedives 171 points Our Bureau
Mumbai , Dec. 26 CALL rates touched 7 per cent in day trade today due to tightness in liquidity. Though rates ended the session at 6.5-6.75 per cent, dealers say the call market is likely to be volatile for the rest of the week due to fears of IMD redemption. Today, RBI lent Rs 17,680 crore to banks through the repo auction. The advance tax outflow to the tune of Rs 20,000 crore has also not yet come into the system, which is putting further pressure on liquidity. The liquidity shortage also affected the bond market, which has been bearish for the last week. The call rate crossed 7 per cent last week on December 19 and earlier on November 11. Most banks have withdrawn money from mutual funds to shore up their reserves to meet any likely IMD redemption. "Dealers either don't want to offload their positions or perhaps don't have funds for fresh positions," said a dealer with a private bank. High yields in short term G-Secs, corporate bonds and T-bills are indicative of this, said a dealer. However, the market is expecting the RBI to announce some liquidity infusing measures such as buyback from MSS or buying dollars, which will release more rupee into the system, said dealers. FII inflows buoy Re: The rupee strengthened against the dollar on the back of Foreign Institutional Investor (FII) inflows. The domestic currency opened at 45.13 and touched an intra-day high of 45.02. It closed the day at 45.0450/05, up from Friday's close at 45.1550. Stocks tumble: Stock prices continued to fall for second session in a row with the BSE Sensex down by more than 170 points on profit taking. The trading volumes were also lower on BSE and NSE. BSE Sensex opened weak in the morning and continued to fall as the day progressed. The index was down by 171.02 points to end at 9085.89. NSE's S&P CNX Nifty closed at 2749.60, down 55.25 points. Brokers said the fall in stock prices is ahead of the expiry of derivatives contracts on Thursday. They said there had been a rise in the stock prices since November and some correction is needed.
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