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Informist, Monday, Sept. 30, 2024

By Richard Fargose and Vidhushi RajPurohit

MUMBAI – Despite a rise in issuances of certificates of deposits and commercial papers, rates on short-term debt papers were down 5 basis points Monday due to firm demand from mutual funds, dealers said. Rates on three-month CDs were quoted at 7.20-7.25%, slightly lower than 7.25-7.30% on Friday. CPs issued by non-banking financial companies of three-month maturity were also down slightly at 7.50-7.55%, from 7.55-7.60% Friday, and papers of similar maturity of manufacturing companies were 7.25-7.30% against 7.30-7.35% on Friday.

Indian Bank and State Bank of India raised a total of INR 68 billion through CDs, sharply higher than INR 6.5 billion raised on Friday. Indian Bank raised INR 38 billion through a three-month CD at 7.20%. The market was interested more in the CD issued by State Bank of India as it is not a frequent issuer, dealers said. SBI raised INR 30 billion at 7.08% with the maturity of the paper scheduled around the end of December.

Banks were on the sidelines last week as they have already rolled over CDs due to mature this month. So far this month, CD issuances have totalled INR 1.45 trillion, while the CDs due to mature totalled INR 1.09 trillion. "Issuing CD is done on a need basis, and since most banks have met their refinancing needs, the number of banks tapping the market has also fallen," a dealer with a state-owned bank said. "More banks will be active in the market from next month when the new maturity dates will come near."

Five companies tapped the CP marked against none on Friday. Companies raised a total of INR 12.75 billion. ICICI Securities was the biggest issuer, as it borrowed INR 6 billion at 7.51% by issuing a paper maturing in December. Godrej Properties and Julius Baer Capital India also issued papers with maturity around December end and borrowed INR 250 million at 7.37% and INR 2.5 billion at 7.37%, respectively.

Other issuers were Sundaram Home Finance and Kotak Mahindra Prime. Both raised INR 2 billion each. Sundaram Home Finance raised funds at 7.85% from an 11-month CP and Kotak Mahindra Prime raised funds at 7.86% from a one-year CP. Issuance of CPs this month has largely remained muted with companies raising INR 1.25 trillion, while papers maturing this month totalled INR 2.00 trillion.

Participation in the secondary market was low due to rise in redemptions, dealers said. "Most mutual funds and other participants were on the selling side, as it is the month-end and there is demand for funds because of redemption strain," a dealer with a mutual fund said. "Activity will renew once the quarter-end period comes to a close and participants have funds to trade." Volume in secondary market of CDs declined to INR 20 billion, from INR 37.85 billion on Friday. In the CP market, the volume was INR 6 billion against INR 11 billion on Friday.

--Primary market

* Indian Bank and State Bank of India raised funds through CDs.

* ICICI Securities, Sundaram Home Finance, Kotak Mahindra Prime, Godrej Properties and Julius Baer Capital raised funds through CPs.

--Secondary market

* Punjab National Bank's CD maturing on Oct. 1 was dealt six times at a weighted average yield of 6.9655%.
* LIC Housing Finance's CP maturing on Jan. 13 was dealt two times at a weighted average yield of 6.8537%.

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

NOTE: Details of the deals have been received from market sources.

End

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

Edited by Ashish Shirke

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