Informist, Wednesday, Feb 7, 2024
By Abhinaba Saha
MUMBAI – Fundraising through certificates of deposit increased today due to a big-ticket issuance by National Bank for Agriculture and Rural Development, dealers said. So far today, CDs aggregating 31.75 bln rupees were issued against 10 bln rupees on Tuesday.
Of the total funds raised today, NABARD raised 18.75 bln rupees through CDs maturing in one year at 7.85%.
Banks have been issuing one-year CDs as current rates are lucrative as compared to rates on three-month papers, a fund manager at a large mutual fund house said. “The ultra-short end papers (CDs) are under pressure because people are selling them to accommodate fresh supply in their books,” he said.
The CD issuances were readily absorbed by mutual funds amid fresh inflows in their liquid schemes and the good credit quality of the papers issued today, market participants said.
Adequate demand from mutual funds kept rates on short-term papers flat, dealers said. Rates on three-month CDs were flat at 7.74-7.94%.
Rates on three-month commercial paper issued by non-banking finance companies were flat at 8.45-8.63%. Rates on papers of similar maturity issued by manufacturing companies were also steady at 7.85-8.05%.
Fundraising through CPs fell, with Aditya Birla Finance being the sole issuer so far today. The non-banking finance company raised 3 bln rupees through papers maturing in three months at 8.52%.
Market participants are looking forward to the Reserve Bank of India’s Monetary Policy Committee’s decision, due Thursday. According to a poll by Informist, the MPC is expected to keep the repo rate unchanged at 6.50%. The focus will be on whether the rate-setting panel will change the policy stance of “withdrawal of accommodation”.
The central bank’s recent series of variable rate reverse repo announcements have dampened sentiment in the money market, market participants said. The RBI today conducted an overnight variable rate reverse repo auction for a notified amount of 500 bln rupees where banks parked around 118.29 bln rupees with the central bank at a rate of 6.49%.
At the end of Tuesday, the liquidity deficit in the banking system was the lowest since Dec 15 at 1.01 trln rupees, as against 1.22 trln rupees on Monday, according to data from the RBI.
–Primary market
* NABARAD, Punjab National Bank, and Bank of Baroda raised funds through CDs
* Aditya Birla Finance raised funds through CPs
–Secondary market
* Punjab National Bank’s CD maturing on Feb 20 was dealt six times at a weighted average yield of 7.3467%
* Sikka Ports and Terminals’ CP maturing on Friday was dealt four times at a weighted average yield of 7.0438%
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 Deepshikha Bhardwaj
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