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Informist, Friday, Nov. 22, 2024

By Vidhushi RajPurohit

MUMBAI – Issuances in the commercial paper segment eased Friday after a relatively high activity day on Thursday. The total amount of CP issuances saw a sharp fall to INR 10.5 billion, from INR 68.3 billion on Thursday. "Issuers placed some high bids on Thursday, which made for an active day in the market," a fund manager with a brokerage firm said. "Today, there was a bit of a slowdown in the market with only a few companies tapping the market and that too for a low amount." 

Only three companies tapped the CP market. Mahindra and Mahindra Financial Services and Kotak Securities each issued a three-month paper to raise a cumulative sum of INR 5.5 billion. Mahindra and Mahindra Financial Services raised INR 3.5 billion at 7.45%. While Kotak Securities borrowed INR 2 billion at 7.52%. The remaining INR 5 billion was mopped up by Birla group holdings, which also issued a three-month paper at 7.66%.  

Low issuances and the month-end redemption pressure for mutual funds likely led to an increase in the rates of CPs, dealers said. The three-month commercial papers issued by manufacturing companies were quoted at 7.20-7.25%, up two basis points from Thursday's 7.18-7.23%. Papers of similar maturity issued by non-banking financial companies were at 7.45-7.50%, an increase of five basis points from 7.40-7.45% previous day's close. 

"Towards the month end it is usual for the rates to pick up slightly as mutual funds, which are the major investors in the debt papers, face a bit of crunch of funds," a fixed income dealer with a brokerage firm said. "But, the rates have not risen sharply and may ease once the fund houses are free from the redemption burden."

Meanwhile, the total amount raised through the issuances of certificates of deposit increased on the back of big borrowings by Bank of India and Federal Bank. The amount raised through certificates of deposit doubled to INR 43 billion from INR 20 billion on Thursday. Bank of India was the largest issuer of the day, raising INR 25 billion through a three-month paper at 7.21%. The bank's borrowing was slightly lower than its repayment amount for Nov. which was at INR 30 billion. The other big issue was Federal Bank, which borrowed INR 15 billion at 7.70% from a one-year paper.

The remaining INR 3.00 billion was raised by Bank of Baroda through a six-month paper at 7.40%. The bank has the second-largest redemption amount for Nov. at INR 98.50 billion and so far, the bank has already exceeded the figure by borrowing a sum of INR 100.75 billion. "Some banks are issuing CDs without a rollover need, but that is not the case for most banks as overall the systemic liquidity is not exerting any pressing funding needs," a dealer with a state-owned bank said. On Thursday, the surplus systemic liquidity was INR 841.55 billion, against INR 971.36 billion on Wednesday. Dealers said that the liquidity surplus will rise steadily next week on account of month-end inflows. The total amount raised from CDs in Nov. stands at INR 572.50 billion, against the maturing figure of INR 629.45 billion.

--Primary market

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

* Mahindra & Mahindra Financial Services and Kotak Securities raised funds through CP.

--Secondary market

* Punjab National Bank's CD maturing on Nov 25 was dealt five times at a weighted average yield of 6.7441%.
* Reliance Retail Ventures' CP maturing on Nov. 25 was dealt twice at a weighted average yield of 6.7441%.

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 Deepshikha Bhardwaj

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