No fresh flotations

OUTLOOK/ Corporate bonds

The primary market has no fresh issues lined up. But the secondary market activity will be full of activity. Most of the banks are interested in picking up short-term corporate bonds both for interest rate yield differential and to avoid taking risk on the government securities portfolio.

Some leading corporates "" such as Hindalco, Tata Motors, Tata Power, Indian Railway finance Corporation (IRFC) and Associated Cements Company (ACC) "" have shifted to rupee borrowing, according to merchant bankers.

Hindalco has already raised Rs 250 crore at 6.5 per cent via a five-year issue, IRFC plans to raise Rs 500 crore through a long-term 15-year issue with a 10-year staggered repayment mechanism. The Tata group companies have plans to raise Rs 1,000 crore through 10-year bonds.

Trading in commercial papers will be brisk

The market for commercial papers will be rife with trading activity as corporates continue to prefer to meet their funds requirement through short-term instruments.

Although most of the public sector undertakings have obtained approval from their respective boards to borrow from the debt market, the illiquidity in the market have forced them to postpone their borrowing programmes.

Banks' investments in commercial papers have gone up by Rs 158 crore to Rs 3,374 crore in the fortnight to August 6, 2004. As on August 15, 2004, they stood at Rs 11,097 crore, compared with Rs 10,848 crore on July 31.

However, the rates of interest on these papers have gone up to 4.65-6.50 per cent from 4.61-5.60 per cent a fortnight ago.