Informist, Thursday, Jan 11, 2024

By Asmita Patil 

MUMBAI – Funds raised through commercial papers fell today as the appetite of mutual fund houses remains skewed amid widening liquidity deficit in the banking system, dealers said. So far today, companies and financial institutions have raised a total of 23.75 bln rupees through CPs against 37 bln rupees on Wednesday.

"MFs (mutual funds) are sceptical about buying papers which they know are going to be in supply, they are choosing (papers) wisely," a dealer with a mid-sized brokerage firm said.  

Fund houses are demanding CPs maturing in up to the first week of April and papers maturing in one-year, an official with a non-banking financial company said. The demand for papers maturing in four months to 11 months is very low. 

A total of four issuers have raised funds through CPs so far today. Small Industries Development Bank of India raised 17.75 bln rupees through two papers maturing in three months at 7.65%. The other three issuers raised funds through papers maturing in one-year. 

"If they (mutual funds) are getting better spreads for one year (maturity papers) only then they are buying NBFC papers or else they are going for non-NBFCs," a dealer at a small brokerage house said.

The demand is skewed as liquidity in the banking system is expected to remain in deficit for the foreseeable future, dealers said. At the end of Wednesday, the liquidity deficit in the banking system was 1.85 trln rupees, as against 1.57 trln rupees on Tuesday, according to data released by the Reserve Bank of India. 

Tight liquidity conditions will push issuers, especially non-banking financial companies, to borrow money through the short-term debt market to meet their working capital needs. This will result in a higher supply of short-term debt instruments in Jan-Mar, which is typically considered a supply heavy quarter. 

"Widening deficit liquidity may pose upward pressure on rates," the dealer from a mid-sized brokerage firm quoted earlier said. 

Rates on three-month CPs issued by non-banking finance companies were quoted at 8.15-8.45%. Rates on papers of similar maturity issued by manufacturing companies were quoted at 7.65-7.85%.

Rates on certificates of deposit were quoted at 7.60-7.80%. HDFC Bank was the sole issuer of CDs, raising 1 bln rupees through paper maturing in one year at 7.90%. 

--Primary market

* SIDBI, Pilani Investment and Industries Corp, Tata Capital Housing Finance, and Birla Group Holdings raised funds through CPs.

* HDFC Bank raised funds through CDs.

--Secondary market
* HDFC Bank's CD maturing on Friday was dealt nine times at a weighted average yield of 6.8017%.
* National Bank for Agriculture and Rural Development's CP maturing on Friday was dealt four times at a weighted average yield of 6.8029%.

At 1700 IST, the following were the volumes, in bln rupees, in the secondary market for short-term debt, as detailed by the Clearing Corp of India's F-TRAC platform:

End

With inputs from Abhinaba Saha

Edited by Deepshikha Bhardwaj

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.