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Informist, Monday, Dec. 1, 2025

By Vaishali Tyagi

NEW DELHI – Trading volume of certificates of deposit surged in the secondary market Monday as mutual funds actively bought and sold short-term debt papers, driven by easing liquidity and available cash. Some investors also cashed in on their investments, dealers said.

The central bank's net absorption from the banking system – a proxy for liquidity surplus – was INR 1.45 trillion Sunday, similar to Saturday and lower than INR 1.75 trillion Friday. The last of the four 25-basis-point cuts in the cash reserve ratio took effect Saturday, and is expected to boost liquidity in the system to INR 2.0 trillion or higher, dealers said. The last tranche of CRR cut added INR 670 billion into the banking system, dealers said. 

Dealers said that mutual funds, having met month-end redemption pressures, had excess funds at the start of the month, driving activity in the secondary market. They said the volume in the secondary market for CDs was better than the previous day, but rates remained unchanged as buying demand was met adequately by sellers. The volume of CD transactions rose to INR 75.75 billion, more than double Friday's volume of INR 44.50 billion. Indicative rates on three-month CDs were 5.95-6.01%, broadly unchanged from 5.96-6.02% on Friday. Rates on six-month and one-year CDs were steady at 6.20–6.23% and 6.40–6.45%, respectively. 

In the secondary market, commercial paper trading rose marginally to INR 23.90 billion from INR 21.45 billion on Friday, though overall volume remained significantly low. Dealers said low volume in CP trading kept rates unchanged. Indicative rates on CPs remained unchanged from Friday as demand from issuers was easily met by investors. Rates on three-month papers issued by manufacturing companies remained unchanged Monday from Friday at 6.03-6.12%. Rates on papers of similar maturity issued by non-banking finance companies were 6.66-6.76%, also broadly unchanged from Friday. 

Short-term debt market was subdued with investors and traders adopting a cautious stance, dealers said However, the market is divided, with some selling after Friday's GDP figures, leading to a rise of 1-2 basis points in rates. However, rates settled in the same range as Friday's close, dealers said. India's GDP growth of 8.2% for the September quarter, data for which was released Friday, was 100 basis points higher than the Informist poll estimate, reducing the need for policy easing.

The primary market remained dull on Monday, with no issuances reported in short-term debt instruments. Issuers stayed sidelined due to ample liquidity and low funding needs, while keep a close eye on RBI's policy outcome on Friday. 

--Secondary market

* Bank of Baroda's CD maturing on Tuesday was eight times at a weighted average yield of 5.3599%

* Kotak Securities' CP maturing Tuesday was traded once at a weighted average yield of 5.4028%

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 Deepshikha Bhardwaj

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