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Informist, Tuesday, Aug 6, 2024

By Vaishali Tyagi

MUMBAI – Yields on corporate bonds ended the day on a steady note as activity in the secondary market remained low before the outcome of the Reserve Bank of India's three-day monetary policy meeting that began today, dealers said. Only mutual funds and banks were said to have been active due to requirement-based trading, while many market participants stayed on the sidelines, they said. 

"Corporate bond market was quiet today, with only few mutual funds and few banks being active to fulfil their requirements," a dealer at a mid-sized brokerage firm said. "Trading was a bit sluggish today, now, everyone is waiting for the monetary policy outcome, which is expected to provide some guidance and influence market sentiment, even though most people are not expecting much." 

The RBI's Monetary Policy Committee is widely expected to maintain status quo on interest rates and retain its withdrawal of accommodation stance, awaiting further progress on retail inflation aligning with the 4% target. However, any signs of the rate setting panel inching closer to rate cuts may drive down yields after the policy review on Thursday.

Today, overall trade volumes in the secondary market remained low, with deals aggregating to 83.55 bln rupees recorded on the National Stock Exchange and BSE combined, down from 142.00 bln rupees on Monday.

Papers issued by HDFC Bank, Hella Infra Market, Krazybee Services, Andhra Pradesh State Beverages Corp, Keertana Finserv, LIC Housing Finance, Cholamandalam Investment And Fin Co, Hinduja Leyland Finance, National Bank For Agriculture And Rural Development, Tata Capital Financial Services, Incred Financial Service, Navi Finserv, Muthoot Finance, Uttar Pradesh Power Corp, Small Industries Development Bank of India, UGRO Capital, and Kerala Infrastructure Investment Fund were traded the most across tenures today. 

Mutual funds were active in the market, with most of the activity concentrated in the shorter-to-medium-term segments of the curve, while insurance companies were active in both shorter- and longer-tenure papers, dealers said. "Mutual funds dealt more in three-year and five-year paper as they find shorter tenure paper more attractive to deal in," a dealer at a mid-sized brokerage firm said.

Market participants expect the secondary market to maintain its current trend, with moderate daily trading volumes, driven by portfolio rebalancing from banks and mutual funds. Meanwhile, the primary market is anticipated to see a steady stream of new issuances from state-owned entities, including regular issuers such as NABARD, Indian Railway Finance Corp, and state-owned lenders. "Primary market will remain good as fresh issuances are coming, which will keep the market active, even if the amounts aren't huge."

The primary market is expected to remain heavy on supply as non-banking finance companies are lined up to tap the market on Tuesday. SBI Cards & Payment Services is in line to raise funds through subordinated bonds maturing in 10 years. The company plans to raise up to 15 bln rupees. Tata Capital has also invited bids to raise 10.53 bln rupees through bonds maturing on Feb 2030.

Apart from that, companies such as 360 ONE Prime, Nuvama Wealth Finance, and Spandana Sphoorty Financial have also planned to tap the market to raise up to 2.75 bln rupees through their respective bonds.   

The market also welcomed the change in valuation norms for perpetual bonds issued by banks raising additional tier-1 capital. On Monday, the Securities and Exchange Board of India said that mutual funds can value their additional tier-1 bond holdings at the bond's call option date, or yield-to-call, relaxing the earlier requirement of valuing these as 100-year securities.

The change in valuation methodology would drastically lower the risk exposure associated with callable perpetual bonds, making it more conducive for mutual funds to invest in these papers, dealers said.

UDAY BONDS

None of the Ujwal DISCOM Assurance Yojana bonds were traded in the secondary market today, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching System showed.

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Manisha Baxla

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