Market Flooded With Fi, Public Sector Debt Paper

The financial market is being flooded with debt paper of financial institutions and public sector undertakings amounting to more than Rs 6,000 crore as well as Central and state government paper worth Rs 6,600 crore.

This is because players are trying to take advantage of the easy liquidity situation caused by the reduction in the cash reserve ratio (CRR) for banks.

The movement of funds from the stock to the debt market has also contributed to the trend.

However, the rising inflation rate is bound to exert pressures on liquidity in the next 2-3 months, particularly if the government opts for a hike in petroleum prices.

 

This is the time when the impounding of debt paper will have a telling effect on interest rates, analysts feel.

Banks and financial institutions currently in the market have a target of raising Rs 2,400 crore.

Two public sector companies