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Informist, Tuesday, Jul 23, 2024

By Siddhi Chauhan

MUMBAI – Fundraising through short-term debt instruments rose today as clouds of uncertainty surrounding the Union Budget for 2024-25 (Apr-Mar) cleared up, dealers said. Market participants heaved a sigh of relief as the full Budget, which was presented by Finance Minister Nirmala Sitharaman in Parliament today, did not contain any tax proposals that could adversely impact investor appetite.

"The hesitation that was seen yesterday (Monday) from many participants ahead of the Budget vanished today," a dealer at a mid-sized brokerage firm said. "This happened because there were no negatives for the short-term debt market." 

Fundraising through commercial papers today was at 46 bln rupees, as against 26.50 bln rupees on Monday, while issuances through certificates of deposits rose to 28.50 bln rupees from 7 bln rupees the previous day. 

For the short-term debt market, a positive takeaway from the Budget was the reduction in supply of Treasury bills. The government revised its net short-term borrowing for the current financial year to (-)500 bln rupees, which means that it will net redeem its outstanding T-bills using its cash pile. The interim Budget presented on Feb 1 had pegged the net short-term borrowing at 500 bln rupees, implying a 1-trln-rupee swing in T-bill issuances.

A lower supply of T-bills would improve liquidity conditions and free up investment space for short-term debt papers issued by corporates. However, the Budget announcement did not have much impact on the pricing of CPs and CDs today, as the government has already cut back on its T-bill issuances since June.

Large maturities of CPs and CDs prompted banks and companies to tap the short-term debt market, dealers said. Today, Reliance Retail Ventures was the biggest issuer of CPs, raising 25 bln rupees alone through papers maturing in two months at a rate of 7.09%. It was followed by Can Fin Homes, which raised 10 bln rupees through CPs maturing in three months at 7.25% rate.

"Today, the continuous trend of deals not being executed due to demand-supply mismatches were broken," another dealer at a mid-sized brokerage firm said. "This happened because companies needed to borrow due to rollover of previous papers, this happened with RRVL (Reliance Retail Ventures) as well. They bought even though the rates were high."

Issuances through CDs also saw a boost as the liquidity surplus in the banking system narrowed, which resulted in banks' demand for funds, dealers said. The liquidity surplus in the banking system shrank to 387.57 bln rupees on Monday from 998.79 bln rupees on Friday due to outflows for goods and services tax payments over the weekend, dealers said. The outflows for the same are expected to have drained around 1 trln rupees, dealers said. 

Today, HDFC Bank raised a total of 21.50 bln rupees through two papers maturing in 11 months and a year at 7.56% and 7.62% respectively. IDBI Bank also raised 7 bln rupees through a paper maturing on Oct 22 at a rate of 7.23%.

The rates on three-month CPs were flat at 7.70-7.85%, while those of similar maturity issued by manufacturing companies were at 7.17-7.37%. Rates on CDs were quoted at 7.10-7.30%. 

--Primary market

* Redington India, Can Fin Home, Reliance Retail Ventures, Godrej Industries, Godrej Agrovet, Aditya Birla Finance, Birla Group Holdings, and Kotak Securities raised funds through CPs

* IDBI Bank and HDFC Bank raised funds through CDs

--Secondary market

* Union Bank of India's CD maturing on Jul 24 was dealt twice at a weighted average yield of 6.7428%.

* NTPC's CP maturing on Sep 20 was dealt 59 at a weighted average yield of 7.0098%.

At 1700 IST, the following were the volumes, in bln rupees, in the secondary market for short-term debt, as detailed by the Clearing Corp of India's F-TRAC platform:

End

With inputs from Sachi Pandey

Edited by Tanima Banerjee

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