Issuances of short-term money market instruments continued to remain low because mutual funds stayed on the sidelines due to redemptions and as most were cautious ahead of the Reserve Bank of India’s (RBI’s) mid-quarter policy review.
A NewsWire18 poll of 13 economists showed RBI is expected to hike both reverse repo and repo rates by 25 basis points each in its mid-quarter policy review on Thursday. Market participants expect around Rs 50,000-55,000 crore to move out of the banking system by Wednesday towards payment of the second installment of corporate advance tax.
Today, short-term money market instruments worth around Rs 625 crore were placed as against Rs 575 crore on Monday. “Fund houses were not keen on investing today because they are facing slight redemptions from banks and companies for payment towards corporate advance taxes,” said a dealer with a mutual fund. Banks were also not keen on issuing certificates of deposit (CDs) as the rates on CDs have risen significantly over the last month.