Issuances of certificates of deposit (CDs) and commercial papers fell today as mutual funds — regular investors in the market — refrained from investing due to limited inflows in their liquid and liquid plus schemes, dealers said.
Today, just Rs 300 crore of short-term papers were placed compared with Rs 1,800 crore on Tuesday. Money markets were shut Wednesday on account of Parsi New Year.
Mutual funds were cautious of their investments ahead of second-quarter corporate advance tax outflows as they will face redemptions from banks and companies by mid-September.
Banks were also not keen on raising funds today due to ample systemic liquidity. Those banks who were raising funds, were only looking at issuing one-year CDs. “We are expecting the rates to inch up slightly as liquidity may decline during September-end for payments towards advances taxes,” said a dealer with a state-owned bank.
Rates on three-month CDs were quoted at 3.75-4.00 per cent today, unchanged from Tuesday’s levels. Three-month CPs were quoted at 4.20-4.50 per cent today, flat from previous close.
Secondary market
Volumes in the secondary market were thin because mutual funds refrained from trading in this segment as well, dealers said.
“Mutual funds are either holding on to cash or investing small quantum in the secondary market,” said a dealer with a mutual fund. Today, April maturity CDs were dealt in the band of 5.15-5.30 per cent, unchanged from Tuesday’s levels.
