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Informist, Tuesday, Jan. 14, 2025

By Sachi Pandey

MUMBAI – Corporate bonds witnessed a subdued trading session Tuesday, with yields ending steady amid low trade volume. Most investors were engaged in only requirement-based trades, resulting in a significant decline in trade volume.

The trade volume on the National Stock Exchange and BSE combined slumped to INR 48.81 billion as at 1500 IST, against INR 97.39 billion on Monday. "Volumes are very low because of liquidity crunch. Also, today several people are celebrating their festival — Makara Sankranti, or Pongal, so they are on leave and that has also affected the volumes," a dealer said.

Papers issued by National Bank for Agriculture and Rural Development, Indian Oil Corp., Telangana State Industrial Infrastructure Corp., Sammaan Capital, Cholamandalam Investment and Finance Co., LIC Housing Finance, State Bank of India, Indian Railways Finance Corp., Housing and Urban Development Corp., and REC were traded the most on exchanges.

The activity in the secondary market was subdued with very few investors participating. Only a few big mutual funds were actively buying and selling, while some traders and foreign investors were seen selling their bonds. "Levels are at such junctures that small players, small insurance or mutual funds are struggling to buy or sell bonds due to a lack of liquidity. Only a few large participants are present in the market," a dealer at a large sized brokerage firm said. 

The market is currently cautious, with traders holding back for firm triggers. "With so much happening around, like tight liquidity, rupee depreciating, yields going up, and other factors traders are cautious and are waiting for clear directions," said a director of fixed income markets at a mid-sized brokerage firm. "Market participants are now expecting some liquidity announcement from the RBI, or they will see if there is any surprise in the budget."

On Monday, liquidity in the banking system was in deficit of INR 2.50 trillion as compared to INR 2.21 trillion on Sunday, as per data from the Reserve Bank of India. The deficit widened as outflows of INR 220 billion took place for payment of the government security auction held on Friday. 

The rupee's decline to a record closing low of 86.6300 against the dollar on Tuesday added to the market's caution. The dollar index rose after Friday's US non-farm payrolls data showed a strong and resilient US labour market.

In the primary market of corporate bonds, too, the volume remained low, with only Aditya Birla Housing Finance, Aavas Financiers, and Tyger Home Finance tapping the debt market to raise funds. 

On Wednesday, Bank of Baroda has invited bids to raise up to INR 50 billion through infrastructure bonds maturing in 10 years. Informist had reported exclusively on Thursday that Bank of Baroda was likely to raise up to INR 50 billion through infrastructure bonds maturing in 10 years the following week. Market participants see the coupon on the bonds in the range of 7.25-7.30%.

Indian Railway Finance Corp. has also invited bids to raise up to INR 30 billion by issuing bonds maturing in 10 years. The market expects coupon to range from 7.20-7.25% for the bond issuance. 

UDAY BONDS

In the secondary market, Ujwal DISCOM Assurance Yojana bonds aggregating INR 44.90 million were traded at a weighted average yield of 7.0990-7.1988%, data from the RBI's Negotiated Dealing System–Order Matching System showed on Tuesday.

* INR 25.00 million of Punjab's Mar. 31, 2025 bonds were traded at 7.0990%

* INR 19.90 million of Telangana's Mar. 7, 2032 bonds were traded at 7.1988%

End

Edited by Ashish Shirke

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