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Informist, Tuesday, Nov. 26, 2024

By Vidhushi RajPurohit

MUMBAI – Issuances of certificates of deposit almost doubled Tuesday on both fresh funding needs and rollover demand, dealers said. The total amount raised through CDs was INR 68.75 billion, up from INR 30.50 billion Monday. HDFC Bank and Canara Bank were the largest borrowers on the day, with each raising INR 20.00 billion. HDFC Bank raised the amount at 7.17% through a three-month paper. Canara Bank issued a six-month paper to raise the amount at 7.43%. For Canara Bank, the issuance was probably to redeem its paper maturing in November, which amounts to INR 20.00 billion.

Another big borrower was Bank of Baroda, raising INR 17.50 billion through a three-month paper at 7.17%. Bank of India and UCO Bank were the remaining two issuers, borrowing a cumulative sum of INR 11.25 billion through three-month paper.

Meanwhile, rates on short-term debt instruments remained steady after the increase of five basis points on Monday. Market participants cited increased demand from mutual funds owing to month-end redemption pressure as the reason for Monday's rise in rates. The three-month commercial paper issued by manufacturing companies were quoted at 7.25-7.30%. Paper of similar maturity issued by non-banking financial companies were at 7.50-7.55%. For CDs, the rates were 7.15-7.20%.

According to dealers, owing to the funds crunch due to the month-end redemption burden, mutual funds are selling short-term paper in the secondary market. The volume of CDs traded was INR 55.65 billion, against INR 71.25 billion on Monday. For CP, the amount was INR 43.10 billion, a slight rise from INR 40.30 billion the previous day. "Fund houses need to have a dynamic portfolio, and they need to have active investments in the longer-tenure segments," a dealer with a broking firm said. "So, to garner fund for their long-term investments they start selling papers with upcoming maturities towards the month-end."

Banks were on the buying side for shorter-tenure paper in the secondary market to meet their liquidity coverage ratio, dealers said. "There was some activity, but the trade in the secondary market will start to pick up once the month-end spending replenishes the liquidity in the banking system," a dealer with a state-owned bank said. On Monday, liquidity was in a deficit of INR 69.56 billion, against the surplus of INR 282.04 billion Sunday.

On Tuesday, three companies tapped the commercial paper segment to raise INR 9.75 billion, against INR 8.00 billion on Monday. Grasim Industries Ltd. and Redington Ltd. each issued three-month paper to borrow INR 5 billion and INR 1.75 billion, respectively. Grasim Industries raised the sum at 7.21%, whereas Redington got a rate of 7.26%. The remaining INR 3 billion was mopped up by Sundaram Finance Ltd. at 7.75% through a paper maturing on Apr. 29.

--Primary market

* HDFC Bank, Bank of India, UCO Bank, Canara Bank, and Bank of Baroda raised funds through CD.

* Sundaram Finance, Grasim Industries and Redington raised funds through CP.

--Secondary market

* Punjab National Bank's CD maturing on Nov. 27 was dealt four times at a weighted average yield of 6.7787%.
* Export Import Bank of India's CP maturing on Dec. 10 was dealt three times at a weighted average yield of 6.9509%.

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 Rajeev Pai

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