More Stories

Informist, Tuesday, Dec. 10, 2024

By Vidhushi RajPurohit

MUMBAI – Rates on three-month commercial paper saw an increase of 5 basis points as dealers cited the high redemption amount for December and the tight liquidity in the banking system. The amount due for redemption in December for CD is INR 1.47 trillion, sharply up from November's amount of INR 629.45 billion. For CP, the maturity for this month is at INR 1.51 trillion, against November's figure of INR 1.14 trillion. According to data on the RBI's website, the liquidity surplus narrowed to INR 233.42 billion on Monday from INR 432.61 billion on Sunday.

However, market participants expect the rates on the short-term debt papers to remain largely range bound, with a room of 5-basis-point movement on days of significant demand or else cash crunch from mutual funds. Rates on CP issued by manufacturing companies with three-month maturity were quoted at 7.20-7.25%, against 7.25-7.30% at the previous close. Rates of papers of similar maturity issued by non-banking financial entities also increased to 7.45-7.50% from 7.40-7.45% at Monday's close. While, for CDs, the rates remained unchanged at 7.15-7.20%.

Big borrowing by National Bank for Agriculture and Rural Development kept the issuances of CP afloat, as the non-banking financial entity raised INR 49.5 billion from a three-month paper at 7.16%. There were three other companies that tapped the CP market, raising a cumulative sum of INR 11 billion, totalling the total CP issuances for the day to INR 60.5 billion. The issuances were largely on the same level as Monday's, INR 50.20 billion and the total amount raised would have been lower if not for the large borrowing from NABARD, dealers said.

Dealers cited the increased rates of CP as the reason for the low issuances on Tuesday. "The rates will likely ease again in a few days, once the banking system liquidity achieves a comfortable level," a dealer with a private bank said. However, dealers also said that the market will not see many fresh issuances in December, as most of the demand from the issuers will be driven by their need to rollover the maturing papers.

The CD segment saw sole issuance from Small Industries Development Bank of India, which borrowed INR 30 billion through a three-month paper at 7.16%. "Issuances in the CD will pick up in the upcoming days on the back of the huge redemption amount," a dealer with a private bank said. 

Trades in the secondary debt market picked up Tuesday, with increased demand for three-month papers from mutual funds, which are the major investors in the market. The three-month papers are the most liquid papers with a higher churn, making it a viable option for mutual funds to invest in, dealers said. Volumes of CD traded in the secondary market were at INR 124.25 billion, up from INR 44.75 billion Monday. For CP, the trade volume was at INR 66.45 billion, against INR 48.40 billion on the previous day. 

--Primary market

* Small Industries Development Bank of India raised funds through CDs.

* National Bank for Agriculture and Rural Development, Aditya Birla Money, Kotak Securities and ICICI Securities raised funds through CPs.

--Secondary market

* Bank of Baroda's CD maturing on Dec. 11 was dealt four times at a weighted average yield of 6.7326%.
* Hindustan Petroleum Corporation's CP maturing on Dec. 17 was dealt six times at a weighted average yield of 6.9024%.

The following were the volumes, in INR billion, in the secondary market for short-term debt at 1700 IST, as detailed by the Clearing Corp. of India's F-TRAC platform:

End

Edited by Akul Nishant Akhoury

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.