Primary issuance declined today because mutual funds refrained from investing in short-term money market instruments on limited inflows in their schemes, dealers said.
“Mutual funds have already invested a lot in this month. Their appetite for investing further has reduced,” said a dealer with a mutual fund.
Today, banks placed just Rs 800 crore worth of certificates of deposit, compared with Rs 1,800 crore on Tuesday.
Mutual funds also expect the rates to remain at current levels after Suresh Tendulkar, chairman, Prime Minister’s Economic Advisory Council, said Reserve Bank of India may not cut interest rates at its quarterly monetary policy review on January 27.
Rates of one-year certificates of deposit rose by 15-20 basis points because demand for these papers from mutual funds declined, dealers said. After the norms announced by Securities and Exchange Board of India on Monday, mutual funds are not looking at papers that have a maturity of more than six-months.
Three-month certificates of deposit were quoted at 6.00-6.25 per cent, compared with 6.25-6.45 per cent on Tuesday.
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Three-month commercial papers were quoted steady at 10.00-10.50 per cent.
Secondary market
Volume continued to remain low because mutual funds refrained from trading in secondary market, dealers said.
“Mutual funds were not keen on investing in secondary market also as they have invested huge amount this month,” said a dealer with a mutual fund.