The Hindu Business Line : Rupee up; bond players cautious

"The market mood is cautious today on account minimal action observed in both debt an equity markets. Unless FII inflows happen, the market sentiment is unlikely to improve. Opposition of the communist parties relating to raising ceilings on FDI in addition to rise in oil prices has caused concerns in the market," said a forex dealer with a private sector bank.

The forwards opened higher and the premia closed higher. The six-month forward closed at 1.40 per cent (1.16 per cent) while the twelve-month forward closed at 1.30 per cent (1.23 per cent).

Domestic debt markets continued to be wrought with apprehensions over the possible levy of the `transactions-tax' even as it witnessed a marginal improvement in trading volumes. Yields on bonds, however, continued to harden.

Bond dealers said the market saw volumes to the tune of around Rs 1,170 crore with most deals done as usual through brokers and put through the negotiated dealing system. The yields on government securities rose by about 3 basis points after the auction announcement for Rs 5,000 crore of the 4.83 per cent 2006 government paper to be conducted on Wednesday.

Some of the securities to be traded were 8.07 per cent 2017 paper, 7.46 per cent 2017 paper. The ten-year benchmark 7.37 per cent 2014 paper closed at a yield of 5.88 per cent against the previous yield of 5.82 per cent.

The Fixed Income Money Markets and Derivatives Association is making representations to the Finance Ministry, which are expected to yield positive results, they said.

Mr Sudhir M. Joshi, Chairman, FIMMDA, told Business Line, "Representations have been made to the Finance Ministry and the RBI by the FIMMDA officials and they have heard the representations. They are expected to consult all segments before reaching a decision."

Commenting on the events of the past couple of days, following the announcement of the transaction-tax levy, he said, there was no suspension of trading on Friday.

The lack of trading activity was largely due to the uncertainty regarding the tax-levy which might translate to around Rs 15 lakh worth of tax on about a Rs100-crore transaction.

"Today's transactions will not be taxed as the Finance Bill is yet to be passed. The market is cautious as they feel that this tax is too heavy ," he said.

Inter bank call rates were in the range of 4.25-4.50 per cent.

Under the LAF window, RBI received and accepted 37 bids worth Rs 17,700 crore in the seven-day repo and eight bids worth Rs 2,965 crore in the fortnightly repo.