Informist, Wednesday, Jan 24, 2024

By Sachi Pandey

MUMBAI – Rates on short-term debt instruments rose by 15-20 basis points today as mutual funds sold papers in the secondary market after the liquidity deficit hit a fresh all-time high on Tuesday, dealers said. "Mutual funds are selling because they don't have inflows and then there is a liquidity issue," a dealer at a mid-sized mutual fund house said. 

Rates on three-month commercial paper issued by non-banking finance companies rose to 8.50-8.70%, from 8.30-8.50% on Tuesday. Rates on similar maturity papers issued by manufacturing companies rose to 7.90-8.10%, from 7.70-7.85% earlier. Rates on three-month certificates of deposit rose to 7.80-8.00%, from 7.60-7.80% on Tuesday.

At the end of Tuesday, the liquidity deficit reached a new high of 3.34 trln rupees, as against 2.72 trln rupees on Monday, data from the Reserve Bank of India showed. The deficit widened on account of gilt auction outflows worth 350 bln rupees, and banks drawing their cash balances down with the RBI. 

Funds raised by companies and financial institutions through CPs were subdued. Companies and financial institutions have raised 20.75 bln rupees through CPs today, against 90 bln rupees on Tuesday. 

"Not a lot of offerings were there in the market today as liquidity is too tight, and because there is not much demand, the levels are also on the higher side", a fund manager at another mid-sized mutual fund house said. 

Of the total funds raised, HDFC Securities raised 8 bln rupees through papers maturing in three months at 8.70%. On Tuesday, National Bank for Agriculture and Rural Development raised 75 bln rupees through three month CPs at 7.85%.  

There was no issuance of certificates of deposit today.

--Primary market

* HDFC Securities, Kotak Securities, Grasim Industries, and Godrej Industries raised funds through CPs.

--Secondary market
* Small Industries Development Bank of India's CD maturing on Apr 24 was dealt 8 times at a weighted average yield of 7.8202%.

* SIDBI's CP maturing on Thursday was dealt 11 times at a weighted average yield of 6.8268%

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

Edited by Maheswaran Parameswaran

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