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Informist, Friday, Oct. 11, 2024

By Richard Fargose and Vidhushi RajPurohit

MUMBAI – Borrowing through short-term debt instruments remained muted due to a lack of demand from companies and banks, dealers said. Amid low issuances and steady demand from mutual funds, the rates on commercial papers and certificates of deposit remained mostly unchanged.

The rates on three-month certificates of deposit were at 7.10-7.15% unchanged from Friday. The rates on commercial paper issued by manufacturing companies were also at Friday's level of 7.15-7.20%. Meanwhile, paper of similar maturity issued by non-banking financial companies was quoted at 7.45-7.50%, down 5 basis points from 7.50-7.55% Friday.

The issuance of commercial papers saw a sharp fall as the amount raised stood at INR 8 billion against INR 25.75 billion raised Friday. Two companies--ONGC Petro additions Ltd. and L&T Finance Ltd--issued three-month commercial papers and raised INR 4 billion each. ONGC Petro additions raised the amount at 7.33% and L&T Finance issued the amount at 7.45%.

"Companies do not have a major roll-over demand for this month and the liquidity in the banking system is also high, so they have another option apart from CP to meet their fund requirements," a dealer with a brokerage firm said. The redemption amount for October is INR 594.13 billion, sharply down from INR 2 trillion maturity in September. Companies raised a total amount of INR 1.27 trillion in September. 

Meanwhile, the amount raised from CD issuances picked up due to big ticket issuances. The total CD issuances stood at INR 22.5 billion, up from INR 9 billion Friday. Two banks tapped the CD market. Bank of Baroda was the biggest issuer. It raised INR 17.5 billion from a six-month paper at 7.40%. Federal Bank raised the remaining INR 5 billion at 7.60% by issuing a one-year CD. 

Market participants cited the prevailing surplus liquidity in the banking system as the reason for lesser number of banks tapping the CD market. "There is a high surplus and low requirements for funds, as the funds raised during last quarter-end have already flushed the banks with adequate funds," a dealer with a state-owned bank said  

As the number of companies and banks in the primary market has been muted for the past couple of weeks, mutual funds are seen trading in the secondary market. The volume of CDs traded in the secondary market was at INR 95.75 billion, against INR 73.75 billion the previous day. The volume of CPs traded in the secondary market was at INR 35.20 billion, sharply up from INR 7.90 billion on Friday. Dealers said due to the surplus liquidity in the banking system, the trading of CDs in the secondary segment was active, as banks were seen investing in these instruments.

--Primary market

* Federal Bank and Bank of Baroda raised funds through CD.

* L&T Finance and ONGC Petro additions raised funds through CP.

--Secondary market

* HDFC Bank's CD maturing Oct. 15 was dealt four times at a weighted average yield of 6.3521%.
* Export-Import Bank of India's CP maturing Oct. 22 was dealt three times at a weighted average yield of 6.8590%.

At 1700 IST, the following were the volumes, in billion rupees, 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 Deepshikha Bhardwaj

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