India Money Market Forecast: Two-day call rate expected to be lower than repo rate on Saturday

In the India money market outlook, analysts predict that the two-day call rate will open slightly below the Reserve Bank of India’s repo rate on Saturday. This forecast is attributed to the comfortable liquidity conditions currently present in the market. It is anticipated that volume will be low on Saturday, as is typically the case for working Saturdays, as banks have already met their funding requirements the previous day.

One significant factor influencing the rate is the existing liquidity conditions, which are expected to dictate the opening rate on Saturday. Due to an adequate supply of funds in the market, the two-day call rate is projected to be positioned below the repo rate. This trend is a reflection of the equilibrium between the demand for and supply of funds in the money market.

Additionally, the low volume of trading activity on Saturdays is a contributing factor to the projected rate. Most trading participants tend to fulfill their funding needs the day before, leading to reduced activity on Saturdays. As a result, the two-day call rate is likely to open at a level slightly below the repo rate on Saturday, given the prevailing market conditions.

It is essential to note that government bonds and overnight indexed swaps are not traded on Saturdays, which further impacts the dynamics of the money market. These instruments play a significant role in shaping the overall market sentiment and liquidity conditions. However, their absence on Saturdays underscores the limited trading opportunities and activity levels observed on weekends in the Indian money market.

Overall, the forecast for the two-day call rate to open below the repo rate on Saturday is a reflection of the current liquidity environment in the market. The equilibrium between demand and supply, coupled with the anticipated low trading volume on the weekend, is expected to drive the opening rate. As market participants navigate these conditions, it will be crucial to monitor any developments that may influence the money market’s dynamics in the coming days.