The Hindu Business Line : Forwards active; gilts range-bound

MUMBAI: The forwards market saw a lot of activity on Tuesday with premia moving about 20 basis points higher than Monday's closing levels. The six-month premium touched a high of 0.91 per cent, but closed lower at 0.81 per cent. The one-year forward touched a high of 0.72 per cent and closed at 0.64 per cent.

"There was plenty of buying and selling of forward contracts. It is expected that premia may go up with corporates opting to borrow through the recently opened ECB option," said a forex dealer in a private bank.

The spot market was dull with the dollar-rupee steady trading in a narrow range of 45.4050-45.4300 in its value against the greenback. There was some dollar supply, which was met with equal demand while the central bank is believed to have stayed away from the market.

Traders in the government securities market were on a selling mood in the morning and prices were range-bound with just 10 paise movement.

The Finance Ministry reiterated its forecast that the inflation rate would remain in 4.0-4.5 per cent. Meanwhile there is a feeling emerging in the financial markets that the Government is attempting to paint a rosy picture with low inflation targets while week-on-week the rate has been rising.

Some indicative papers were the 7.46 per cent 2017 paper which opened at Rs 118.65 and closed at Rs 118.58/59 and the 7.49 per cent 2017 paper which opened at Rs 117.98 and closed at Rs 118.10.Through the LAF window the central bank accepted 42 bids worth Rs 27,445 crore at the repo rate of 4.5 per cent.