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<PN: First take edited by Saji Sir>

Informist, Monday, Jan. 20, 2025

By Ashna Mariam George

MUMBAI – Yields on corporate bonds in the secondary market started the week on a steady note as market participants limited their activity only to requirement-based trading, dealers said. "The market is cautious ahead of (incoming US president) Trump beginning his tenure, then the (Union) Budget. Until then, everyone will be in a wait-and-watch mode," a dealer at a mid-sized brokerage said.

Market participants believe that even though the chances of US President-elect Donald Trump enforcing anything right away are slim, his stand on global issues and his trade policies will guide the market in the near term. Meanwhile, they expect trade volumes to be subdued in the secondary market at least till the Union Budget scheduled on Feb. 1. "We are expecting some kind of tax reforms from the Budget, but it is unpredictable now. So the market won't react before Feb. 1, which will also keep the volumes low," another dealer at another mid-sized brokerage said.

Trade volume fell in the secondary market on Monday with deals aggregating to only INR 42.83 billion recorded on the National Stock Exchange and BSE combined, against INR 54.03 billion on Friday. Banks were active on both buying and selling sides, dealing in short-term papers, while only pension funds were active at the longer end of the curve, dealers said. 

Papers issued by HDFC Bank, Indian Railway Finance Corp., LIC Housing Finance, Power Finance Corp., Rajasthan Rajya Vidyut Prasaran Nigam, Manipal Healthcare, Aditya Birla Housing Finance, and Shriram Finance were traded most on exchanges. 

Market participants were also disappointed by the absence of any measures by the Reserve Bank of India to infuse durable liquidity into the system. Traders were expecting the RBI to announce an open market purchase of gilts on Friday or over the weekend. However, traders expect the central bank to gauge liquidity conditions for another week and see the impact of the daily variable rate repo auctions before coming up with some durable measure. On Friday, the net liquidity injected by the RBI--a proxy for systemic liquidity conditions--fell to INR 1.96 trillion against INR 2.36 trillion on Thursday.

In the primary market, there were only two issuances on Monday. LIC Housing Finance raised INR 12.45 billion through bonds maturing on Jan. 19, 2035, at a coupon of 7.58%, while Toyota Financial Services India raised INR 5 billion through its bonds maturing on Mar. 21, 2028, at a fixed coupon of 8.06%. 

"We might see a slowdown in primary market issuances till the (RBI) policy," a dealer at a mid-sized brokerage firm said. "There will be more issuances, especially from NBFCs (non-banking financial companies), after considering the policy outcome." The next meeting of the Monetary Policy Committee is scheduled for Feb. 5 to 7.

UDAY BONDS

In the secondary market, Haryana's Mar. 31, 2035 Ujwal DISCOM Assurance Yojana bonds aggregating INR 12.50 million were traded at a weighted average yield of 7.2817%, data from the RBI's Negotiated Dealing System–Order Matching System showed on Monday. 

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

With inputs from Sachi Pandey  

Edited by Saji George Titus

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