MFs turn cautious, primary issues dip

Primary issuances were down On Thursday because of low demand for short-term papers by mutual funds (MFs) as incremental inflows in their schemes were less, dealers said.

Issuances totalled Rs 400 crore On Thursday, compared with Rs 725 crore on Wednesday.

“Mutual funds are receiving limited inflows from banks as most lenders are now investing directly into certificates of deposits in the market,” said a dealer with a mutual fund.

Issuers are also reluctant to place certificates of deposit amid talk of interest rate cuts by Reserve Bank of India soon.

“Banks are hoping for a rate cut this week, which will pull down the rates on CDs. Most of the banks are waiting for the rates to fall,” said a dealer with a state-owned bank.

 

Most money market participants are hoping the RBI will cut interest rates further given the rise in yields due to huge government market borrowing. Three-month CDs were quoted at 5.60-5.90 per cent, unchanged from Wednesday. Three-month commercial papers were also unchanged at 9.20-9.40 per cent.

Call: Ends flat
Call money rate ended unchanged On Thursday because liquidity was ample for banks to meet their daily reserve requirements, while demand was weak, dealers said.

One-day call money rate ended at 4.05-4.10 per cent, unchanged from Wednesday.

CBLOs ended at weighted average rate of 3.67 per cent, compared with 3.70 per cent.

Dealers said demand for funds eased further with banks having met most of their reserve needs well ahead of the reporting Friday.

On Thursday, banks parked Rs 69,365 crore at the central bank’s twin reverse repo tenders, compared with Rs 67,595 crore on Wednesday.