The rupee ended flat on Tuesday from its previous close of 61.80 on the back of Reserve Bank of India’s measures to improve liquidity in the banking system.

In intra-day trade, the domestic unit touched a high of 61.62 and a low of 61.90.

Indranil Sen Gupta, India Economist, DSP Merrill Lynch, said in a research report, “We were always sceptical of the July tightening to defend the rupee as the FII equity portfolio, of $220 billion, which responds to growth, is far larger than the $28 billion FII bond portfolio, which may respond to rate hikes. Not surprisingly, the long-awaited FCNR (B) deposit-cum-swap facility ($5.7 billion so far) to raise FX reserves has been far more effective in stabilising the INR.”

Meanwhile, Government securities rallied by over a rupee on Tuesday on the back of the Reserve Bank of India’s liquidity easing measures announced on the previous day.

The 7.16 per cent government security, which matures in 2023, ended higher at Rs 91.33 from the previous close of Rs 90.19. The yields softened sharply to 8.49 per cent from 8.68 per cent. Bond yields and prices move in opposite directions.

The G-Sec yields eased today in reaction to the policy measures announced by RBI yesterday, notably a cut in MSF by 50 bps and introduction of term repo facility, IDBI Bank said in a report.

Call rates

The inter-bank call money rate, the rate at which banks borrow from each other to meet their short-term fund requirements, ended sharply lower at 8.95 per cent against the previous close of 9.45 per cent.

(This article was published on October 8, 2013)
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