The Hindu Business Line : Call rates drop below 10% as CRR cut brings cheer to money market

Mumbai, Oct. 13 The inter-bank call rates came down below 10 per cent on Monday from the high of 22 per cent on Friday, as the liquidity condition eased with Rs 60,000 crore of funds coming into the system, post the 150 basis points cut in CRR.

According to Mr K. Harihar, Treasury Head, Development Credit Bank, call rates will subside further to around 9 per cent once the Government resumes its spending from October 20. The expectation is that the committee formed by the Government may recommend further measures to ease the liquidity. Therefore, call rates could further fall to around 6-8 per cent once the system has enough liquidity.

The news of the further cut in the CRR saw the bond market rallying on Friday. The prices of the 10-year benchmark security touched Rs 104 in day trade. However, the prices were flat on Monday, after news of a possible SLR cut dampened market sentiments.

Rupee gains

With the cut in CRR, the domestic currency, which had crossed 49 against a dollar last week, recouped some of its losses. Although the movement was rangebound, the rupee gained aided by positive sentiments, said analysts.

Mr Dilip Raghuwanshi, Forex Advisor, Asit C Mehta Pvt Ltd, said, “The market is taking the measures in a positive tone. We should see improvement in the equity market, which will in turn help the rupee. People will gain confidence and come back to the equities, which will also help the rupee.”

However, he said that the rupee is unlikely to strengthen too much too soon, because the impact of the global crisis is still being felt. “I expect the rupee to be in a range of 47-49. Investors are still cautious. Unless investors gain more confidence, the rupee will be rangebound,” he said.