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Updated on May 29, 2000

Short term interest in the money market moved widely throughout the past week. Initially the market was at the bottom levels of 2.00% and 3.00% but later in the week rates shot up with the double digit mark being touched. The outflow of Rs. 3 billion (an OMO injection maturity) and the subsequent injection of Rs. 6.50 billion on Thursday via the scheduled OMO did cause overnight rates to ease from 9.00% to touch back at 4.00%, but later rose back with trades at 8.00% and 9.00%. However on the weekend, rates eased marginally to close at 6.00%. Agriculture related outflows from the market have been attributed to the volatility in overnight level at the higher end of the spectrum, even after the net injection of Rs. 3.5 billion in the OMO.

Concentration in term repos was primarily focused on covering positions over June 30th. Bids for 45 day funds were as high as 7.25% but offers were hard to come by. Moderate amounts were traded in the two and three month tenors between 7.15% and 7.20% while six month offers remained in the vicinity of 7.40%. The past week saw significant interest evident in long term papers. FlBs having five years to maturity was available in the market with buyers looking at yields close to 10.50%. However later these yields fell hinting towards the desperation on part of specific buyers having been left with limited options for lucrative long term investment. The expected further cut in returns on the saving schemes, as announced in the newspapers, has also prompted certain interbank players to show a willing buying interest in these long dated instruments. This coupled with the expected bearish change in rates on the NSS, should serve as a benchmark for long term interest rates, which in turn will help the monetary authorities in correctly pricing the anticipated next breed of financial instruments.

The outlook for rates does seem to be on the higher side keeping in mind that there is a net maturity of only Rs. 1.45 billion in June next. So far the State Bank has acted prudently in averting a liquidity crunch via timely injections, and we feel that this policy should continue till the tail end of June 2000 in order for rates to remain easy.




1 Year 08.00 08.00 09.25%
2 Year 08.75 08.75 10.00%
3 Year 09.25 09.25 12.75%
4 Year 09.50 09.50 13.00%
5 Year l0.00 09.75 14.00%
10 Year 10.75 10.75 14.50%



Bid Date Instrument Result Settlement
May 17 T-BILL May 17 May 18
Target Amount Bid Amount Accepted Amount
Rs. 4.461 Bln

Rs. 8.275 Bln

  Rs. 2.350 Bln



Instrument Data Amount


04 May

28,050 Mln


18 May

4,425 Mln





This Week

1 Wk Ago

1 Yr. Ago

1 Week 06.75 04.25 01.50
1 Month 07.00 06.25 03.75
3 Month 07.20 06.85 06.75
6 Month 07.20 07.10 08.25
1 Year 07.50 07.50 N. A.



Maturing This Week 1 Wk Ago 1 Yr Ago
1 Month 07.65 06.75 05.50
2 Month 07.45 07.00 06.25
3 Month 07.40 07.00 07.00
4 Month 07.35 07.10 07.50
5 Month 07.20 07.10 08.25