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Informist, Wednesday, Apr. 2, 2025

By Siddhi Chauhan

MUMBAI – Fundraising through commercial papers rose sharply on Wednesday as investors tried to lock in yields ahead of a widely-expected interest rate cut by the Reserve Bank of India's Monetary Policy Meeting next week, dealers said. A sharp fall in borrowing costs also boosted CP issuances, although not a single certificate of deposit was issued on Wednesday.

"This is the first day of the financial year, investors are keen to lock in these rates as market has priced in the chance of rate cut in this month's MPC (meeting)," a dealer at a brokerage firm said. "The rates have also cooled off significantly today, which has led issuers to borrow funds." On Wednesday, INR 84.75 billion was raised through CPs, up from INR 12.00 billion on Friday. Indian financial markets were shut on Monday for Id-ul-Fitr and on Tuesday for the year-end closing of accounts.

Easier liquidity conditions have brought down borrowing costs across tenures, with rates on three-month CPs of non-banking finance companies falling to 7.05-7.25% from 7.75-7.95% on Friday. Rates on CPs issued by manufacturing companies fell to 6.85-7.05% from 7.55-7.75%. Reliance Retail Ventures was the largest issuer of CPs on Wednesday, raising INR 30.00 billion through a paper maturing in June at 6.70%. Reliance Jio Infocomm raised INR 25.00 billion, also through a June maturity paper at 6.75%.

Rates on three-month CDs fell to 6.75-6.95% on Wednesday from 7.50-7.70% on Friday, thanks to an improvement in liquidity conditions, which also meant there was little reason for banks to borrow, dealers said. On Tuesday, the RBI absorbed INR 1.42 trillion of liquidity on a net basis, the most since Nov. 18, due to the central bank's massive liquidity injections and the government's higher-than-expected spending at the end of March. Issuers also stayed on the sidelines on expectations of a further fall in borrowing costs. "Already we have seen a cool-off of about 50 bps in three-month CD rates till now. More is expected to come after rate cut (next week)," a dealer at a state-owned bank said. "Why would an issuer borrow at higher rates when there are chances of rate cut?"

--Primary market

* Kotak Mahindra Investments, Godrej Indutries, ICICI Securities, Canfin Homes, Tata Capital Housing Finance, Reliance Retail Ventures, Grasim Industries, Reliance Jio Infocomm, L&T Finance, and HDB Financial Services raised funds via CPs.

* No CDs were issued.

--Secondary market

* Bank of Baroda's CD maturing on May 6 was traded twice at a weighted average yield of 6.7099%.

* National Bank for Agriculture and Rural Development's CP maturing on May 2 was traded twice at a weighted average yield of 6.6500%

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 Avishek Dutta

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