The Hindu Business Line : Rupee gains; gilt prices up

MUMBAI: A staedy spate of foreign investment inflows and a sliding US currency led the rupee to strengthen for the second consecutive session on Tuesday to end at 43.80/81 against the dollar. The Indian currency finished 14 paise stronger than its previous close at 43.94/95 to the dollar.

In the morning session itself, the domestic currency reached its intra-day high at 43.76 as the dollar lost ground in the international foreign exchange markets, dealers said.

Forward premia inched down with the six month annualised premium closing at 2.07 per cent (2.25 per cent) and the one year annualised premium at 1.51 per cent (1.65 per cent).

Prices of government securities went up by nearly 60 paise with yields dropping by five basis points as buying activity increased in the afternoon trades. The market was buoyant on expectations of an easing in domestic oil prices as oil futures dipped overseas, dealers said.

Traders also expect buying of gilts from mutual funds in early January, as special deposit interest with provident funds worth about Rs 8,000 crore will be paid in cash instead of being reinvested. "Traders are accumulating positions," said a senior dealer at a primary dealer, which underwrites government debt sales.

Benchmark 7.38 per cent 2015 paper ended at Rs 105.30 at a yield of 6.68 per cent while the 7.55 per cent 2010 paper ended at Rs 105.12 at a yield of 6.41 per cent.

Call rates were tight, in a range of 5.90 to 6.00 per cent, but are expected to ease off, according to dealers. The RBI injected Rs 8,485 crore in the system through 12 bids it received in the one-day repo auction, while in the one-day reverse repo auction, it accepted all 4 bids worth Rs 1,025 crore. In the CBLO market, 141 trades worth Rs 5,500 crore were transacted.