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Are commercial paper market reviving?


MUMBAI: Commercial paper sales are showing tentative signs of revival, with top-rated companies flocking back to the primary market.

Daily primary CP volumes were Rs 12,060 crore Tuesday, show data from the Clearing Corporation of India that provides statistics based on settlement dates. The level is the highest for a day in the past one month, dealers said.

“Commercial paper market has begun to see a bit of revival for large, well-managed, top rated companies” said Siddharth Chaudhary, senior fund manager – fixed income, Sundaram Mutual Fund. “It will take time to bring back normalcy as these credit events have happened at a time when system liquidity is expected to tighten due to seasonal and frictional factors.”

National Bank for Agriculture and Rural Development (NABARD) has raised about Rs 4,575 crore while Housing Development Finance Corporation (HDFC) mopped up Rs 2,000 crore. LIC Housing Finance sold CPs worth Rs 1,000 crore. Those CPs were of two-three- and six-month maturities.

"Even as top companies resume to tap commercial papers, the market begins to move. It was completely frozen a few weeks ago amid uncertainties. While rates have stabilised, may take some more time to return to normalcy.," said Lakshmi Iyer, Kotak Mutual Fund.

A large public sector bank, which sold HDFC commercial papers to a top mutual fund house in the secondary market, is said to have bought new CPs from the primary market, dealers said.

In the secondary market, total volumes were at Rs 7,148 crore, significantly higher than past average volumes. HDFC CPs changed hands at least in nine such transactions.

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