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Informist, Wednesday, Apr. 8, 2026

 

By Vaishali Tyagi and J. Navya Sruthi

 

MUMBAI — Issuances of commercial papers gained momentum Wednesday in the money markets, driven by a decline in short-term rates and a marked improvement in investor sentiment following the easing of the military conflict in West Asia, market participants said. 

 

Rates in the CP market softened after news of a ceasefire between the US and Iran lifted global risk appetite. The development led to a fall in government bond yields and an easing of overnight indexed swap rates. The broad decline in yields translated into lower funding costs in the money market, prompting increased activity in CP issuances.

 

Total CP issuances in the primary market were INR 225.53 billion Wednesday, massively up from INR 49 billion on Tuesday, according to data available on the Clearing Corp. of India's F-TRAC platform. National Bank for Agriculture and Rural Development raised INR 50.00 billion through CPs maturing on May 7 at 6.25%. Reliance Retail Ventures raised INR 56 billion through CPs maturing on Jun. 22 at 6.5699%. Other major issuers included Reliance Industries, Bajaj Financial Securities, Kotak Securities, and ICICI Securities. 

 

Rates on three-month commercial papers issued by non-banking finance companies fell to 6.90-7.10% from 7.30-7.35% Tuesday, tracking low crude oil prices after the announcement of the ceasefire. Further, comments by Reserve Bank of India Governor Sanjay Malhotra brushing off concerns over higher overnight indexed swap rates seen recently also supported the decline in CP rates. 

 

Malhotra, during the post-monetary policy press conference Wednesday, dismissed any concerns arising from the recent rise in overnight indexed swap rates and said not much should be read into it. The market was earlier expecting the central bank to raise key interest rates by 75-100 basis points in 2026-27 (Apr-Mar). However, after the US and Iran agreed to a two-week ceasefire late Tuesday and following the RBI governor's comments during the monetary policy announcement, the market now does not expect any rate hike till September.

 

Market participants said the improved sentiment encouraged investors, particularly mutual funds, to step up deployments in short-term debt instruments. "With rates coming off, investors are more comfortable allocating to CPs as they want to invest extra cash available with them as they have received inflows," a dealer at a state-owned bank said. 

 

Mutual funds, which typically face redemption pressures towards the end of the financial year, had relied on market borrowings in March to manage liquidity needs. However, with the start of the new financial year, redemption pressures have eased while inflows have resumed, leaving funds with surplus cash to deploy.

 

In the absence of significant certificates of deposit supply, mutual funds have turned more aggressive in subscribing to CP issuances. "There are limited CD issuances at present, so CPs are naturally attracting more demand," a dealer at a brokerage firm said.

 

Banks, on their part, have remained largely absent from the CD market. Credit offtake is typically subdued in April as companies delay fresh borrowings at the start of the financial year. As a result, banks' requirement to raise funds through CDs amid comfortable liquidity conditions remains low. "March typically sees elevated CD issuances due to balance sheet requirements, but April is usually the dull month in terms of credit demand," a dealer at a state-owned bank said. 

 

System liquidity remains in surplus, at over INR 4 trillion, further easing rates. The surplus cash with investors has intensified demand in the primary CP market, especially in shorter tenors. Market participants said increased supply and demand in the three-month segment led to a sharp fall in rates at the shorter end of the curve.

 

Amid these favourable conditions, issuers have actively tapped the market. Development finance institutions such as the National Bank for Agriculture and Rural Development and Small Industries Development Bank of India were seen raising larger amounts, taking advantage of the relatively lower rate environment and strong investor appetite.

 

Overall, the combination of easing rates, improved liquidity, and stronger investor sentiment has revived activity in the CP market, with issuances expected to remain firm in the near term unless credit demand from banks picks up meaningfully.  End

 

Edited by Tanima Banerjee

 

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