Investors preferred to purchase commercial papers (CPs) on Tuesday due to the higher rates and shorter-tenure of these papers, dealer said.
“Investors are mostly keen on investing in CPs because companies are offering up to six-month papers that are feasible for investors,” said a dealer with a mutual fund.
Companies too are keen on issuing such papers after the base rate came into effect. Base rate of various banks ranges from 7.0-8.5 per cent. At present, mutual funds are opting to stay on the sidelines and hold on to cash due to uncertainty about further move by RBI on interest rates.
“We were sitting on cash and we will continue to do so until further clarity emerges on the rate hike. There is still expectations RBI could hike rates further in their policy,” said a fund manager at a private mutual fund.
RBI will release its first quarter monetary policy review on July 27.
Three-month certificates of deposit (CDs) were quoted at 6.2-6.4 per cent, compared with 6.30-6.45 per cent on Monday, while three-month CPs were quoted at 6.65-6.85 per cent. One-year CDs were dealt at 6.7-6.9 per cent.
