{"id":91608,"date":"2018-09-27T03:42:45","date_gmt":"2018-09-27T03:42:45","guid":{"rendered":"http:\/\/www.bnreport.com\/how-sbi-redemption-affected-debt-market\/"},"modified":"2018-09-27T03:42:45","modified_gmt":"2018-09-27T03:42:45","slug":"how-sbi-redemption-affected-debt-market","status":"publish","type":"post","link":"https:\/\/www.bnreport.com\/en\/how-sbi-redemption-affected-debt-market\/","title":{"rendered":"How SBI redemption affected debt market"},"content":{"rendered":"

MUMBAI: The State Bank of India<\/a> (SBI<\/a>) last Friday redeemed at least Rs 15,000 crore of mutual fund<\/a> investments, which also put pressure on asset managers to sell their holdings in the secondary market, multiple people familiar with the matter told ET. <\/p>\n

While the purpose of the SBI redemptions is not clear, some market participants linked the timing of the sale to a planned accumulation of cash that could be subsequently used to fund either equity or debt at the struggling financier, IL&FS. The countrys biggest bank, a shareholder in the infrastructure conglomerate, is expected to extend a credit line, although nothing is finalised. <\/p>\n

An email sent to SBI remained unanswered until the publication of this report. <\/p>\n

Friday marked one of the most volatile sessions of trading in recent memory, with the benchmark Sensex swinging about 1500 points between gains and losses. Concerns over the cost of funds for non-banking finance companies (NBFC) caused stocks in virtually the entire financial services sector to slump, with DHFL losing about 50% through a dramatic afternoon of trading. <\/p>\n

Fund managers are keen to understand where SBI would deploy the redeemed cash, and the role of such investments in stabilising the rattled debt market that is negotiating the first northward movement in the interest-rate cycle since the current administration took office. <\/p>\n

\u201cRedemptions toward the end of most quarters are normal. But what was not normal was the pace with which SBI redeemed those mutual fund investments, putting the focus on the IL&FS contagion,\u201d said one of the persons cited above. <\/p>\n

The redeemed funds were mostly parked in liquid schemes, which invest in short-term debt instruments. Banks normally invest in them. Many of those mutual fund schemes are said to have invested in debt papers of NBFCs, dealers said. <\/p>\n

Separately, volumes in commercial papers (CP) and corporate bonds dipped, with cost of borrowing rising. CPs \u2013 short term debt papers \u2013 sold by NBFCs have since become costlier. They, however, started to recover since Tuesday. <\/p>\n

CP costs have risen by about 60-70 basis points between Friday and Tuesday across one-two- and three-month maturities. Corporate bonds, too, issued by NBFCs have offered about 30-40 basis points higher than usual. <\/p>\n

\u201cThere was a complete freeze in the debt market as fear gripped the trading floors. The bulk sale<\/a>, indeed, dented the sentiment that day,\u201d said an asset management<\/a> executive, who manages thousands of crores of rupees in debt investments. <\/p>\n

Later on Sunday, the SBI chairman reiterated the lenders continued support toward NBFCs, while the central bank, too, stepped in to assure the roiled markets of liquidity injection in an emergency. <\/p>\n

\u201cSBI lends support to NBFCs in private and public sector within the regulatory policy framework and will continue to do so,\u201d SBI Chairman Rajnish Kumar said last Sunday. \u201cSome comments are being attributed to SBI about the bank being wary of lending to NBFCs. The rumours are baseless. There is no concern on the liquidity of NBFCs in view of their liquid cash position, and availability of committed lines.\u201d <\/p>\n

<\/a><\/strong> <\/a><\/p>\n

Original Article<\/a><\/p>\n

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ET Markets<\/a><\/h5>\n

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MUMBAI: The State Bank of India (SBI) last Friday redeemed a..<\/p>\n","protected":false},"author":1,"featured_media":91609,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[202],"tags":[],"class_list":["post-91608","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"yoast_head":"\nHow SBI redemption affected debt market - Business News Report<\/title>\n<meta name=\"description\" content=\"MUMBAI: The State Bank of India (SBI) last Friday redeemed a..\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.bnreport.com\/en\/how-sbi-redemption-affected-debt-market\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How SBI redemption affected debt market - 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