The mutual funds (MFs) preferred to remain on the sidelines and invest only in papers maturing up to December due to tight liquidity in the system and on the view that short-term rates could rise in coming weeks, dealers said.
Continued tightness in liquidity was evident from the Reserve Bank of India’s repo tender, where banks borrowed Rs 89,455 crore on Monday as against Rs 88,500 crore on Friday. “There are views that rates could rise due to tight liquidity led by Coal India’s IPO and retail bond issues. This tight liquidity could put further strain on short-term rates,” said a dealer with a mutual fund.
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