Issuances of short-term money market instruments rose today because mutual funds—the key investors—stepped up purchases after they witnessed huge inflows into their schemes, dealers said.
Around Rs 3,200 crore worth of short-term papers have been placed thus far today.
“Banks parked the cash they had redeemed from mutual funds for their quarter-end, which is one reason why fund houses were flooded with liquidity,” said a dealer with a mutual fund.
Banks usually redeem their cash from mutual fund schemes during June-end to enhance their balance sheet.
“We are mostly issuing one-year certificates of deposit because mutual funds are now keen on deploying cash in longer tenure maturities,” said a dealer with a state-owned bank.
