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Informist, Thursday, Sep 12, 2024

By Siddhi Chauhan

MUMBAI – After heavy issuances at the start of the week, the short-term debt market took a breather as issuances through commercial papers and certificates of deposits fell for the second day, dealers said. Issuances through CPs fell to 7.5 bln rupees against 21.75 bln rupees on Wednesday, while no funds were raised through CDs against 71.00 bln rupees the previous day. 

Today, Godrej and Boyce raised 2 bln rupees through CPs maturing in three months at a rate of 7.38%. Godrej Properties raised 2 bln rupees through CPs maturing in three months at 7.44%, while Tata Projects also raised 2 bln rupees through six-month CPs at a rate of 7.85%. The remaining amount was raised by Godrej Industries.

On Wednesday, Small Industries Development Bank of India was the largest issuer of CPs, followed by Tata Capital. SIDBI raised 13.75 bln rupees through CPs maturing in three months at a rate of 7.31%. Further, Tata Capital also raised a total of 5 bln rupees through two CPs maturing in three months and one year at 7.67% and 7.85%, respectively.

"Mutual funds are not keen on buying because they have already been aggressive at the beginning of this week," a dealer at a mid-sized brokerage firm said. "So they are just selling in the secondary market, just like yesterday (Wednesday)." Issuances through CPs are expected to pick up next week as the appetite from mutual funds will be revived once they recover from absorbing the heavy supply this week, dealers said. CPs worth 162.25 bln rupees and CDs worth 281 bln rupees have been issued so far this week. 

Today, banks did not tap the short-term debt market due to lack of demand for funds as the liquidity surplus in the banking system widened, dealers said. On Wednesday, HDFC Bank was the sole issuer to tap the short-term debt market, raising 71 bln rupees through CDs maturing in three months at a rate of 7.29%.   

Liquidity in the banking system was in a surplus of 1.53 trln rupees on Wednesday, compared with 1.08 trln rupees on Tuesday, according to the Reserve Bank of India's data. A similar trend is expected to continue on Friday unless a big-ticket issuer taps the short-term debt market, dealers said. 

Issuances of CDs are expected to pick up next week as outflows for advance taxes will start from Tuesday, dealers said. The market expects around 1 trln rupees to be drained out of the banking system starting Friday as companies are set to pay the second instalment of advance tax for 2024-25 (Apr-Mar), dealers said.

These outflows generally start from the 15th of every month, but as the money markets are shut on both Saturday and Monday, the outflows will happen on Tuesday, dealers said. Money markets are shut on Monday for Id-e Milad. The outflows for advance tax outflows are expected to exert pressure on the banking system's liquidity, resulting in a rise in interbank lending rates, dealers said. 

Rates on three-month CPs issued by non-banking finance companies and manufacturing companies were flat at 7.60-7.80% and 7.25-7.45%, respectively. The rates on CDs maturing in three months were at 7.30-7.50%.

--Primary market

* Godrej and Boyce, Godrej Properties, Godrej Industries, and Tata Projects raised funds through CPs.

* No funds raised via CDs.

--Secondary market

* Canara Bank's CD maturing on Friday was dealt seven times at a weighted average yield of 6.4434%.

* Titan Co Ltd's CP maturing on Friday was dealt three times at a weighted average yield of 6.4830%.

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

End

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

Edited by Tanima Banerjee

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