Informist, Wednesday, Nov 3, 2021

By Vishal Sangani

MUMBAI – Rates on commercial papers of manufacturing companies fell today because of steady demand from mutual funds amid prevailing high surplus liquidity in the banking system, dealers said.

Demand from mutual funds was steady because the investments made by them in ultra short-term CPs will return to mutual fund houses, dealers said.

According to data compiled by Informist, CPs worth around 590 bln rupees are due for redemption on Monday and Tuesday.

Non-banking finance companies had raised funds through ultra short-term papers to provide funds to clients for the initial public offering of Nykaa, owned by FSN E-Commerce Ventures and Fino Payments Bank Ltd.

Rates on three-month CPs of manufacturing companies were down at 3.75-3.90% as against 3.80-3.95% on Tuesday, and those on papers of non-bank finance companies were at 4.35-4.65%

Liquidity in the banking system is estimated to be in a surplus of over 7.69 trln rupees.

Liquidity surplus is expected to widen in the coming days because of inflows on account of redemption of the 8.79%, 2021 bond worth 753.00 bln rupees on Monday.

Money markets will be closed on Thursday and Friday on account of Diwali and Diwali Balipratipada, respectively.

Issuances of CPs rose today because some companies tapped the market to meet their funding requirements and also to take advantage of a fall in rates, dealers said.

Also, a few companies tapped the market to roll over papers set to mature in the coming days.

So far today, CPs aggregating 70.60 bln rupees were issued against 5.65 bln rupees sold on Tuesday. Reliance Industries was the major issuer, raising 20.00 bln rupees through papers maturing in three months at 3.78%.

On the other hand, no certificates of deposit were issued by banks today. Issuance of CDs has been particularly scarce due to surplus liquidity in the banking system. With growth in bank deposits consistently outpacing credit growth, banks have had little reason to tap the short-term debt market.

Loan growth remained muted due to lack of demand for big-ticket loans from corporates and as banks remained cautious in anticipation of rising asset quality stress due to the COVID-19 pandemic.

Rates on three-month CDs were quoted at 3.45-3.60% in the secondary market.

--Primary market

* ICICI Securities, Tata Motors Finance, Birla Group Holdings, Reliance Jio Infocomm, Reliance Industries, Indian Oil Corp, Kotak Mahindra Prime, Reliance Retail Ventures and Godrej Industries raised funds through CPs.

--Secondary market

* No CDs were traded in the secondary market today

* Reliance Jio Infocomm's CP maturing on Tuesday was dealt two times at a weighted average yield of 3.6526%

Following are volumes at 1530 IST in the secondary market for short-term debt, in bln rupees, as detailed by the Clearing Corp of India's F-TRAC platform:

NOTE: Details of the deals have been received from market sources.

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Snigdha Kuttikat

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