The Hindu Business Line : Securities rally; rupee in range

MUMBAI: Bond prices rallied by over one rupee across maturities on Friday, as the inflation figures for the week-ended August 14 came in at 7.94 per cent, as against 7.96 per cent in the first week of August.

Dealers said although some of the enthusiasm had ebbed because the market was expecting inflation to come down to 7.85 per cent, the fact that it was lower in itself was a boost to market sentiment.

Added to that, reports that the RBI Governor, Dr Y.V. Reddy had allayed fears of an immediate hardening in interest rates also help bolster bond prices, dealers said.

The benchmark 10-year — 7.37 per cent 2014 yield ended lower at 6.09 per cent at Rs 109.35, as against Thursday's closing level yield of 6.27 per cent (Rs 107.90).

"This rally may not be sustainable. It remains to be seen how the inflation rate moves in the next few weeks," dealers said.

Call rates closed easy at 4.25 levels.In the CBLO market, around 123 trades were conducted amounting to Rs 3,563.80 crore.

In the seven-day repo under LAF, the RBI received and accepted 5 bids amounting to Rs 970 crore at the rate of 4.50 per cent. In the three-day repo, 46 bids amounting to Rs 25,330 crore were received and accepted.

Meanwhile, the rupee closed steady at 46.30 per dollar on Friday in a range-bound forex market, as against Thursday's closing of 46.33.

The rupee remained in a narrow band after opening at 46.3450/35 and strengthened on the back of good dollar supplies. "Aside from the rupee being propped up by State-run banks, the dollar is also weakening overseas, so this adds to the rupee's strength".

In the forwards market, the six-month premium ended at 2.48 per cent (2.49 per cent) and the premium for one year ended at 2.16 per cent (2.12 per cent).