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Informist, Wednesday, Nov. 27, 2024

By Vidhushi RajPurohit

MUMBAI – Issuances of commercial papers rose sharply on account of a big-ticket issuance by Small Industries Development Bank of India. On Wednesday, the CP issuances amounted to INR 58.5 billion, sharply up from INR 9.75 billion on Tuesday. Of the total sum, the development finance institution solely mopped up INR 50 billion by issuing a three-month paper at 7.20%.

Aditya Birla Finance and Aditya Birla Housing Finance cumulatively raised INR 8 billion. Aditya Birla Housing Finance borrowed INR 3 billion at 7.24% through a three-month paper. Aditya Birla Finance issued a paper maturing in March to borrow INR 5 billion at 7.49%. The remaining INR 500 million was borrowed by Axis Finance through a three-month paper at 7.50%.

The rates on short-term debt instruments have remained steady after a rise of 5 basis points on Monday. Market participants cited reduced 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 was 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%.

Meanwhile, the liquidity deficit in the banking system and redemption pressures on mutual funds kept the volumes in the secondary market largely around the same level as the previous day, dealers said. The volume of CDs traded was INR 52.50 billion, against INR 55.65 billion on Tuesday. For CPs, the amount was INR 47.20 billion, a slight rise from INR 43.10 billion the previous day.

"Towards month-end, fund houses have a cash crunch because of their repayment obligations, so they try to sell the short-tenure papers which are usually bought by banks for their LCR (liquidity coverage ratio) requirements," a dealer at a mid-size brokerage firm said. However, as banks are facing liquidity deficits, they are not actively buying in the secondary trade, dealers said. The liquidity deficit rose on Tuesday to INR 364.18 billion, from INR 69.56 billion on Monday. "The trade in the secondary market will likely see some increase once the month-end spending replenishes the liquidity in the banking system," a dealer with a state-owned bank said.

Issuances of certificates of deposit fell on Wednesday to INR 20 billion from Tuesday's INR 68.75 billion. Bank of Baroda and Canara Bank were the only two participants in the CD market. Bank of Baroda raised INR 12.5 billion at 7.17% through a three-month paper. Canara Bank also issued a three-month paper to raise INR 7.5 billion at 7.17%. 

--Primary market

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

* Aditya Birla Housing Finance, Aditya Birla Finance, Axis Finance and Small Industries Development Bank of India raised funds through CP.

--Secondary market

* Bank of Baroda's CD maturing on Dec. 9 was dealt five times at a weighted average yield of 6.8989%.
* National Bank for Agriculture and Rural Development's CP maturing on Dec. 3 was dealt four times at a weighted average yield of 6.9253%.

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 Akul Nishant Akhoury

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