Mutual funds refrained from purchasing papers due to limited inflows in their fixed maturity plans, dealers said.
“Due to limited inflows in our FMPs we have limited our investments. We have invested huge amounts this month in one-year papers,” said a dealer with a mutual fund.
This month mutual fund have invested around Rs 9,700 crore in one-year certificates of deposit.
According to funds they have exhausted all their needs for one-year CDs.
“Banks are also of the view that the rates will fall further on expectation that Reserve Bank of India would cut interest rates,” said a dealer.
Rate cut hope strengthened after a senior government official said RBI is likely to cut Repo Rate and Cash Reserve Ratio of banks to revive the country’s slowing economy.
RBI got no bids at its repo tender, while it got Rs 15,325 crore in its twin reverse repo operations.