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Informist, Wednesday, Dec. 11, 2024

By Vidhushi RajPurohit

MUMBAI – Active issuances earlier in the month and expectations of moderation in rates led to lacklustre borrowing through short-term debt instruments on Wednesday, dealers said. However, dealers expect activity in the market to pick up in the upcoming days as December has large amounts of redemptions coming up. The amount due for CD redemption in December is INR 1.47 trillion, sharply up from INR 629.45 billion in November. For CP, the maturity due this month is INR 1.51 trillion, as against INR 1.14 trillion in November.

On Wednesday, rates on CP issued by manufacturing companies with three-month maturity were quoted at 7.20-7.25%, unchanged from the previous close. Rates of papers of similar maturity issued by non-banking financial entities settled at 7.40-7.45%, down from 7.45-7.50% on Tuesday. Rates on three-month CDs remained unchanged at 7.15-7.20%.

"The rates will likely remain range bound, as the market is factoring in both the large redemption amount and also the easing of rates in the near term," a dealer with a state-owned bank said. However, dealers also remain cautious regarding the liquidity conditions in the banking system and how it evolves after the first tranche of cut in cash reserve ratio effective from Saturday. According to data on the RBI's website, the liquidity was in surplus at INR 356.67 billion on Tuesday.

Issuances in the CP segment halved on Wednesday to INR 33.50 billion, from INR 60.5 billion on Tuesday. The National Bank for Agriculture and Rural Development was the largest issuer of CP, raising INR 10 billion via a three-month paper at 7.16%. The non-banking financial entity raised INR 49.5 billion on Tuesday as well at the same rate. 

Indian Bank was the sole issuer of CD, raising INR 20 billion via a three-month paper at 7.15%. Dealers cited the inflation print for November, due on Thursday, as a reason for cautious trading as the data will give further cues to the market regarding the rate cut trajectory.

Trades in the secondary market remained steady on demand for three-month papers from mutual funds, dealers said. The three-month papers are the most liquid papers with a higher churn, making them a viable option for mutual funds to invest in, dealers said. Volumes of CD traded in the secondary market were at INR 149.15 billion, up from INR 124.25 billion Tuesday. For CP, the trade volume was at INR 45.20 billion, against INR 66.45 billion on the previous day. 

--Primary market

* Indian Bank raised funds through CD.

* L&T Finance, National Bank for Agriculture and Rural Development, IGH Holdings, Axis Securities, Kotak Securities and Bajaj Housing Finance raised funds through CP.

--Secondary market

* HDFC Bank's CD maturing on Dec. 12 was dealt 13 times at a weighted average yield of 6.7537%.
* Titan Company's CP maturing on Dec. 12 was dealt three times at a weighted average yield of 6.7537%.

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 Saji George Titus

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