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Informist, Wednesday, Jan. 22, 2025

By Ashna Mariam George 

MUMBAI – Yields on corporate bonds maturing in three years fell by 1-2 basis points in the secondary market on Wednesday due to active buying by foreign banks and mutual funds, dealers said. However, yields on five-year and 10-year papers remained steady due to lack of fresh triggers, they added. 

"The market was a little bit active in the one-to-three year segments, and there was some positive buying momentum which made the yields better," a dealer at a mid-sized brokerage firm said. 

In the secondary market of corporate bonds, while mutual funds and foreign banks were buying on Wednesday, a few of the mutual funds were also selling papers, dealers said. "There are a lot of primary issuances coming up, so they are making space for them," the brokerage dealer quoted above said. 

Market participants said that buying activity improved the trade volume Wednesday. "There were some more trades happening compared to the previous two days," a dealer at a large-sized private sector bank said. Deals aggregating to INR 83.56 billion were recorded on the National Stock Exchange and BSE combined at 1500 IST, against INR 66.41 billion on Tuesday.

Papers issued by HDFC Bank, Indian Railways Finance Corp., Silverline Investment and Finance, LIC Housing Finance, National Bank for Agriculture and Rural Development, Rajasthan Rajya Vidyut Prasaran Nigam, Aditya Birla Housing Finance, and Kotak Mahindra Prime were traded most on exchanges. 

Going forward, market participants expect to take positions based on cues from the Union Budget scheduled on Feb. 1. "We expect the Budget to be fairly fiscally prudent with about one-third of it allocated to capital spending," a dealer at a mid-sized private sector bank said. "Fiscal deficit is expected to be somewhere around 4.5% (of GDP in 2025-26)." Reuters reported on Jan. 15 that the government might project fiscal deficit at 4.5% of GDP in FY26, and expects its fiscal gap to fall 10-20 basis points below the 4.9% of GDP budgeted for FY25. 

The primary market is also robust with marquee issuers lined up to raise funds through the bond market on Thursday. National Housing Bank has invited bids to raise up to INR 40 billion through bonds maturing on Jul. 4, 2031. Market participants believe that the bond issuance can attract major investments from banks and mutual funds and can bag a coupon in the range of 7.20-7.25%. 

Another government-owned entity, NHPC, is also gearing up to raise funds through its corporate bonds, marking its return after a nearly two-year hiatus. The hydroelectricity generation company plans to raise up to INR 26 billion through 10-year bonds on Thursday. According to dealers, the issue will garner investments from pension funds, insurance companies and mutual funds. The cut-off for the issue is expected to be in the range of 7.15-7.20%. 

The last time NHPC raised funds through the corporate bond market was in February 2023, when it raised INR 9.96 billion through bonds maturing in 15 years at a coupon of 7.59%. 

The government-owned trade financier, Export-Import Bank of India, will also seek bids for its bonds maturing on Jul. 27, 2028 and is planning to raise up to INR 25 billion. Market participants expect the coupon for the issue to be at 7.20-7.25% levels.

UDAY BONDS

None of the Ujjwal DISCOM Assurance Yojana bonds were traded in the secondary market on Wednesday, according to the Reserve Bank of India's Negotiated Dealing System–Order Matching System.

BENCHMARK LEVELS FOR CORPORATE BONDS:

End

Edited by Tanima Banerjee

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