Grooved Run On The Cards

The non-statutory liquidity ratio (non-SLR) market is expected to see rangebound trading this week.

Though liquidity will be good, the on-tap sale of state development loans on Monday, which is expected to spill over into Tuesday, coupled with intermittent holidays will see five basis points either side movement in yields.

Trading will be concentrated in the 2007 maturity papers. Good trading interest is seen in the 6.20 per cent 2007 RIL and 6.10 per cent 2007 HDFC papers.

The RIL paper, which last Saturday finished at 6.17 per cent, could trade in the 6.10 to 6.20 per cent yield band.

Yield on the HDFC paper, which Saturday was last dealt at 6.11 per cent, is seen being dealt in the 6.05-6.13 per cent range.

The best-rated Hindalco paper, which Saturday was dealt at 5.90 per cent, is seen hovering in the 5.85-5.95 per cent yield band.

With most of the public sector undertaking (PSU) papers being traded at the sub-six per cent yield levels and primary debt issuances by them expected, the market players will not want to offload/trade their existing portfolio.

Primary debt issuances by corporates are unlikely this week as the foreign currency borrowing route is proving to be a cheaper bet for raising resources.

Thanks to the strong rupee, a weak dollar, and crashing forward premiums, a best rated corporate can now raise a five year loan at around four per cent.

Indian Railway Finance Corporation (IRFC) is in the market to raise Rs 500 crore via strips (separately traded registered interest and principal of securities) issue.

A strips issue lets investors hold and trade the individual interest and principal components of the bond as separate securities.

BPCL is seen placing Rs 100 crore worth of 6.96 per cent 2009 oil bonds on Monday with some banks at over Rs 105. This bond was traded at Rs 105.05 on Saturday.

As liquid schemes of mutual funds have received substantial inflows from banks and other entities, commercial papers could see good action.