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Informist, Thursday, Dec. 5, 2024

By Vaishali Tyagi

MUMBAI – Yields on corporate bonds in the secondary market stayed in a narrow range Thursday as market participants limited their activities to basic portfolio requirements ahead of the Reserve Bank of India's monetary policy meeting outcome due Friday, dealers said. Market participants said most traders stayed cautious ahead of the policy outcome and majorly focused on realigning their portfolios. 

"The market is split on rate cut expectations, creating uncertainty. Alternatively, if the rate cut outlook was one-sided, we would have seen some buying or selling trend," a dealer at a mid-sized brokerage firm said. "But now we're seeing a standoff, as there's a 50-50 consensus on a potential rate cut, fuelling uncertainty about rate trajectory."

Market participants are expecting a 25-basis-point cut in the cash reserve ratio and there are very low chances of a policy rate cut. Both the things are there which are keeping traders cautious, and they are waiting for clarity on the same.

Dealers said volumes remained moderate with most activity concentrated on shorter-tenure papers, a dealer at a mid-sized brokerage firm said. On Thursday, deals aggregating INR 104.22 billion were recorded on the National Stock Exchange and BSE combined, compared with INR 141.57 billion on Wednesday. 

In the secondary market, mutual funds and banks were mainly active on the buying and selling sides, and traded in papers maturing in the shorter tenure, dealers said. A few insurance companies were also active on the buying side in the longer-tenure paper but with limited activity, a dealer at a mid-sized brokerage firm said. "Major activity took place in the shorter or mid-segment, very few long-term papers were dealt, only insurance companies bought-longer-tenure papers," a dealer at a mid-sized brokerage firm said.

Papers issued by the HDFC Bank, Bank of India, LIC Housing Finance, Cholamandalam Investment And Finance, National Bank For Agriculture And Rural Development, Bajaj Finance, Small Industries Development Bank of India, NTPC were traded the most on exchanges.

On Thursday, the corporate bond primary market remained active. A rare issuer, Telangana Industrial Infrastructure Corp. Ltd. raised INR 99.95 billion of unsecured bonds maturing on Nov. 24, 2034, at a yield of 9.35%, payable quarterly. These bonds carry a separate transferable redeemable principle part structure, where the principal and coupon payments are stripped, and sold separately to investors. Equitas Small Finance Bank also raised INR 5 billion through bonds maturing on Dec. 5, 2030, at a fixed coupon of 9.60%. 

Uncertainty surrounding the interest rate trajectory has led to cautiousness among issuers, resulting in a slight fall in issuances. However, market activity is expected to pick up once the monetary policy decision is announced, which will bring clarity to the market.

UDAY BONDS

No Ujjwal DISCOM Assurance Yojana bonds were traded in the secondary market on Thursday, according to the Reserve Bank of India's Negotiated Dealing System–Order Matching System.

End

Edited by Akul Nishant Akhoury

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