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Informist, Monday, Jul 29, 2024

By Siddhi Chauhan

MUMBAI – Fundraising through the short-term debt market was meagre today as demand from mutual funds cooled down due to redemption pressure that is typically observed towards the end of the month, dealers said. As a result, today only 7.25 bln rupees were raised through commercial papers against 28 bln on Friday, while 11.5 bln rupees were raised through certificates of deposits against 31 bln rupees on the previous trading day.

Ultratech Cement and Godrej Industries were the only entities to raise funds through CPs today. Ultratech Clement raised 5 bln rupees through CPs maturing in three months at a rate of 7.18%, while Godrej Industries raised 2.25 bln rupees through CPs maturing in three months at a rate of 7.27%. 

"The issuance was down today because it is month-end and redemption starts to take place during this time," a dealer at a mid-size brokerage firm said. "So people will now wait for this to get over and issuance will pick pace after this."  

While there was little participation from mutual funds in the primary market today, they were active sellers in the secondary market, dealers said. "Today the activity in the secondary market was more than that of the primary market," another dealer at a mid-size brokerage firm said. "Mutual funds were seen selling papers of shorter maturity in the secondary market to meet their liquidity requirements." 

Issuances through certificates of deposit also fell from the previous day due to a lack of demand from most banks due to a liquidity surplus, dealers said. The liquidity surplus in the banking system rose to the highest since Apr 5 to 1.45 trln rupees on Friday, data from the Reserve Bank of India showed.

Dealers said inflows on account of government spending and redemption of the 8.40%, 2024 gilt worth 609.45 bln rupees widened the liquidity surplus in the banking system. The liquidity surplus is expected to rise further in the coming days as inflows of around 800 bln rupees on account of month-end spending by the government are expected to enter into the banking system over the week, dealers said. 

Bank of Baroda and Punjab National Bank were the only lenders that tapped the short-term debt market by raising funds through CDs today. While Bank of Baroda raised 5.25 bln rupees through CDs maturing in three months at a rate of 7.14%, Punjab National Bank borrowed 6.25 bln rupees through three-month CDs at 7.15%. 
 

Rates on three-month CPs remained at 7.65-7.85%, while those of similar maturity issued by manufacturing companies were at 7.19-7.39%. Rates on CDs were quoted at 7.10-7.30%. 

--Primary market

* Ultatech Cement and Godrej Industries raised funds through CPs

* Punjab National Bank, Bank of Baroda raised funds through CDs

--Secondary market

*Indian Bank's CD maturing on Aug 20 was dealt thrice at a weighted average yield of 6.9206%.

*Small Industries Development Bank of India's CP maturing on Aug 9 was dealt four times at a weighted average yield of 6.9550%.

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

Edited by Saji George Titus

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