Money Market: Call money rates should be stable

By Lakshmi Iyer

System liquidity continues to be around Rs 40,000 crore. This is the second half of the reporting fortnight, hence call money rates should continue to be stable at around 3.50%-3.75%. Outflows in the week would be on account of T-bill and government securities auctions and is not likely to impact liquidity adversely. CP/CD rates should continue to trade range bound with no major triggers expected either ways.

Marginal tightening could happen at the near end of the yield curve. Bank CD issuances are expected to continue. RBI continues to watch global cues, especially emanating from the eurozone as well as domestic factors such as inflation to formulate a monetary policy stance. RBI seems to be adopting a wait and watch attitude on the monetary action front and if global conditions continue to deteriorate, inter policy action may not be warranted.

(The author is Head, Fixed Income & Products, Kotak AMC)