Latest news with #G-Sec
India Gazette
a day ago
- Business
- India Gazette
Nifty 500 climbs 3.5% in May, driven by Industrials, Consumer, and Financial Services: Motilal Oswal
New Delhi [India], June 8 (ANI): The Nifty 500 index climbed 3.50 per cent in May, driven by steady gains in Industrials, Consumer Discretionary, and Financial Services sectors, an analysis by the Motilal Oswal observed. Sectoral indices of FMCG (Fast-Moving Consumer Goods) and utilities underperformed, posting slight declines of -0.09 per cent and -0.04 per cent, respectively, as per the analysis. As per the observation, broader market sentiment remained positive, with the Nifty 50 up 1.71 per cent and the Nifty Midcap 150 surging 6.30 per cent. Smallcap and Microcap indices also registered sharp gains. Among factor-based indices, Momentum and Quality continued to deliver consistent returns, while Enhanced Value and Low Volatility posted moderate advances. Government bond indices reflected stability, with modest gains in both 5-year and 10-year G-Sec benchmarks. As per the market experts and several reports available in the public domain, the latest decision of the Reserve Bank of India (RBI) to slash the policy interest rate by 50 basis points will significantly benefit sectors such as banking, NBFCs, real estate, and automobiles. The RBI's Monetary Policy Committee on Friday cut the repo rate by 50 basis points to 5.50 per cent (from 6.00 per cent). This larger-than-expected cut marks the third consecutive reduction in 2025, totalling 100 bps of easing since February. At the end of the trading on Friday, sectors such as banking and realty saw a major upswing soon after the repo rate revision. 'This big rate cut will impact the margins of the banks and, therefore, bank stocks will be under pressure in the near term. However, the credit growth that this rate cut will hopefully stimulate will compensate for the dip in margins,' said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited observing the possible impact of the RBI decision. Except for Media, which was one per cent down on Friday, all other sectoral indices ended higher with metal, auto, and consumer durables jumping over one per cent each. (ANI)
The Wire
5 days ago
- Business
- The Wire
Foreign Portfolio Investors Set New Record by Selling G-Secs Worth Rs. 25,544 crore
Representative image: Photo: Unsplash Real journalism holds power accountable Since 2015, The Wire has done just that. But we can continue only with your support. Contribute Now New Delhi: Government securities (G-Secs) worth Rs. 25,544 crore were sold by foreign portfolio investors (FPIs) under fully accessible route (FAR) in the first quarter of FY26. The instance marks the first such quarterly sale after their inclusion in global indices. Factors including the recent conflict between India and Pakistan, narrowing spread between 10-year US Treasury (UST) and Indian 10-year G-Sec along with the tariff war of the US resulted in the selling of (G-Secs) and parking the proceeds in safe haven assets such as US Treasuries, reported The Hindu Business Line. On June 28, 2024, G-Secs were included in JP Morgan Government Bond Index – Emerging Market (GBI-EM). They were also included in Bloomberg's EM Local Currency Government indices, beginning January 31, 2025. Investment in G-Secs on fully hedged basis has become less attractive after the yield spread between 10-year UST yield and the corresponding maturity G-Sec has compressed to about 180 basis points (bps) from about 400-500 bps a couple of years back. 'This has primarily happened due to a steep rise in UST yields on account of concerns over the US fiscal deficit, large borrowing and expected huge redemption pressures (10-year UST touched around 4.58 per cent), while Indian bond yields have remained relatively stable thanks to RBI's monetary policy actions in the recent months and new 10-year government bond is currently trading around 6.20 per cent,' said Venkatakrishnan Srinivasan, founder and managing partner, Rockfort Fincap LLP. The Wire is now on WhatsApp. Follow our channel for sharp analysis and opinions on the latest developments.
Time of India
30-05-2025
- Business
- Time of India
Outdated risk, renewed opportunities: A case for acquisition financing
Multiple factors today make a compelling case to lift the restrictions on acquisition financing by Indian banks: Live Events Banks Already Underwrite Similar Risks: Banks already take on similar 'feared-upon' risk exposure, just in indirect ways. They finance companies based on enterprise value and cash flows (e.g. project finance, loans against assets, etc.). From a lender's perspective, financing an acquisition is not fundamentally different from any other large corporate loan. It is a credit decision based on the cash flows of the target and acquirer. Banks regularly lend for projects, expansions, and working capital by underwriting business risk and future cash flows. An acquisition loan, similarly, can be serviced from the acquired company's cash flows. A cash-flow lending approach to a merger or buyout is aligned in spirit with the credit appraisal banks perform daily. The loan's performance will depend on the merged entity's earnings, just as a project loan depends on project revenues. Banks should be free to analyze the risk and lend if it fits their appetite. Denying them this ability is essentially denying a legitimate business opportunity within a sound risk framework. Convergence of Borrowing Costs: Over the past 25 years, India's interest rates have steadily declined and converged toward global levels. The historical premium that made INR debt far more expensive than USD debt, has shrunk. For instance, the spread between Indian and US 10-year bond yields hit just ~164 basis points in May 2025, India's 10-year G-Sec at ~6.25% versus the US 10-year at ~4.59%. This is the lowest gap in two decades, compared to spreads of 400–500 bps in the early 2000s. In practical terms, the cost advantage of foreign-currency borrowing has diminished, especially once currency hedging is accounted for. Indian Banks Are Losing Market Opportunity: The prohibition on acquisition finance means Indian banks have zero share in a large and growing segment of corporate credit, the financing of mergers and takeovers. In 2024, India saw M&A deals worth over $70 billion in disclosed value. Virtually none of this could be financed by Indian banks. Instead, acquirers resort to workarounds: domestic NBFCs, high-cost private credit, and offshore structures. Current strictures in place force acquirers to either borrow from NBFCs or issue NCDs (debentures) that are subscribed by foreign investors and funds. Frequently, Indian companies set up offshore SPVs to raise acquisition debt from international banks. This status quo is a lose-lose given that the Indian banks miss out on lucrative loan assets (high yield, secured by business cash flows), and Indian regulators lose some oversight as financing shifts to opaque offshore jurisdictions. The interest payments on these acquisition loans flow out to foreign lenders or shadow banks, depriving India's banking sector of income that it could earn if policies were liberalized. Opacity and Regulatory Visibility: Current financing structures for big acquisitions are often complex and less transparent. For example, an Indian conglomerate's takeover might be funded by a maze of offshore loans routed through subsidiaries in foreign jurisdictions, or by privately placed debentures to funds. Regulators have limited sight into these arrangements compared to bank loans under their direct purview. By contrast, if Indian banks were permitted to lend for acquisitions, the financing would occur under domestic regulation, with full visibility of source and use of funds. This enhances surveillance of systemic risks. Bringing acquisition finance onshore into the formal banking system reduces opacity and improves regulatory control. Indian Corporates at a Competitive Disadvantage: Perhaps the most compelling reason to lift the ban is to level the playing field for Indian companies and improving access to financing options. As of now, domestic corporates cannot easily leverage their own banks for acquisitions, whereas foreign competitors, including financial sponsors, can raise debt in their home markets to fund global M&A. The leverage ban handicaps Indian entrepreneurs by raising their cost of growth. Conversely, enabling rupee acquisition loans would bolster Indian companies' competitiveness, fueling a more dynamic domestic M&A environment. This prohibition was a safety measure in an era of weaker oversight and governance. Thirty years later, India's financial system has transformed. Corporate governance and risk controls have improved dramatically. Indian banks now follow stringent capital norms and robust credit-risk frameworks, and regulators enforce transparency in corporate dealings. The context which justified the ban has fundamentally evolved. India's regulatory ecosystem and bank risk management practices in 2025 bear no resemblance to those in 1992. With modern credit analytics and stronger corporate governance, banks are fully capable of assessing risks within their prudential norms. A well-regulated opening of acquisition finance by banks would reflect the maturity of India's markets in 2025. (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel India, having drawn over USD 1 trn in FDI and led Asia's IPO surge, stands ready to define a new growth story. But no nation accelerates on global highways with domestic wheels held back. Restrictions born of a bygone era meant for an unsteady past must now yield to a resilient, transparent, and well-regulated the security market debacle that spanned the 90s and early 2000s, regulators intervened and restricted banks from financing sensitive sectors like stock purchases, real estate, gems & jewelry, etc. effectively not permitting banks to finance equity beyond a certain limit. These strictures were placed considering market volatility and lack of institutional capacity with banks in risk measuring and management. Acquisition financing refers to debt funding used specifically to acquire equity. It is essentially a loan taken to buy another company. Globally, this is a common tool in M&A transactions, often forming part of a 'leveraged buyout' structure. The appeal lies in capital efficiency given that debt is cheaper than a result, a buyer can justify a higher purchase price when part of the deal is financed by debt. In other words, debt financing lets acquisitions be value-accretive where pure equity would be too costly. This is beneficial not only for acquirers but also for sellers and investors, as it facilitates more competitive bids and unlocks value.(If an investor reinvested annually at the prevailing 10-year bond yields each year from 2000–2025, the compound annual return (IRR) would be roughly 7–8% in India vs. 3–4% in the US; however the differential has markedly narrowed. In May 2025 India's 10 year bond yielded 6.25% while the US 10Y was 4.59%, a spread of only 164 basis points. Hedging a USD loan into INR for such periods has often cost ~3–5% in forward premiums. Hence, post-hedge calculations imply that INR borrowing costs are in fact cheaper. The borrowing cost advantage for foreign currency debt has diminished, strengthening the case for rupee-denominated acquisition loans.)Removing the blanket ban on acquisition financing, perhaps with prudent safeguards, will align banking policy with India's current economic reality. It's a timely reform that can drive growth, improve transparency, and strengthen the hand of Indian businesses in the global today have an opportunity to catalyze the next wave of value creation by simply trusting the evolved risk management systems and allowing banks to do what they do best, 'assess credit and fuel growth'. The real beauty of India's M&A story is yet to unfold, and lifting this restriction will be a key step in that journey.: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
Mint
28-05-2025
- Business
- Mint
India VIX: Volatility either behind us or largely priced in; shift focus ‘from events to earnings': MOPW
Domestic brokerage house Motilal Oswal Private Wealth (MOPW), in its May 2025 Alpha Strategist report, noted that the bulk of event-driven volatility—both global and domestic—appears to be behind us or largely priced into the markets. In today's deals, India's fear gauge, the India VIX, has declined over 3 percent to its day's low of 17.91 on Wednesday, May 28. Meanwhile, the Indian benchmarks, Sensex and Nifty were down around 0.28 percent in intra-day deals. Against this backdrop, the firm believes it is now time for investors to shift their focus from macro events to corporate earnings, as early indicators point to improving performance by India Inc. According to MOPW, early Q4 FY25 results signal a healthy corporate earnings trajectory, and the Nifty 50 is expected to deliver a 14 percent CAGR in EPS over the next two years. With large-cap valuations having moved from 'attractive' to 'fair' levels following the recent rally, the firm believes return expectations must be moderated going forward. While mid and small caps are still trading at a premium relative to their long-term historical averages, MOPW acknowledged that selective opportunities are beginning to emerge in these segments as well. The wealth manager stated that India is relatively better positioned compared to global peers, citing macroeconomic indicators such as a declining 10-year G-Sec yield, a relatively stable rupee, contained inflation, and ongoing fiscal discipline. It further highlighted that concerns around economic slowdown are being balanced by positive trends including record-high GST collections in April 2025 (up 12.6 percent YoY), a rising manufacturing PMI, and strong export figures—all of which suggest that economic activity may be picking up pace. Additionally, foreign institutional investor (FII) flows have turned net positive for two consecutive months, indicating renewed investor confidence in the Indian market. In terms of investment strategy, MOPW recommends a lump sum approach for Hybrid, Large Cap, and Flexi Cap funds, given the market's stabilisation and fair valuation zone. On the other hand, for Mid and Small Cap categories, the firm suggests a staggered investment approach over the next 2–3 months, with any market pullback offering an opportunity for more aggressive deployment. In the fixed income space, the wealth manager noted that benign inflation and slowing growth have allowed the RBI to adopt a more accommodative stance, pivoting towards growth support. The 10-year G-Sec yield has remained stable and gradually declined, aided by favourable demand-supply dynamics and RBI interventions such as OMO purchases, term repo auctions, and USD/INR swaps. Given the current yield environment, MOPW believes the steepening of the yield curve makes accrual strategies more attractive, while cautioning that long-term yields are not compelling enough for duration plays. Gold prices touched all-time highs in April 2025, driven by global uncertainties. However, MOPW now considers gold to be overstretched, as some of that uncertainty has started to ease. As a result, the firm maintains a neutral stance on gold from an asset allocation perspective. Motilal Oswal Private Wealth's latest strategy note underscores a paradigm shift in investor focus—from reacting to macro events to riding the wave of corporate earnings. With much of the uncertainty now in the rear-view mirror and India's economic indicators showing resilience, the stage appears set for fundamentals to take charge. Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Business Standard
14-05-2025
- Business
- Business Standard
Jio Credit raises Rs 1,000 crore in maiden bond issue at 7.19% yield
Jio Credit, a wholly-owned subsidiary of Jio Financial Services, has raised Rs 1,000 crore through maiden bond issuance, selling bonds maturing in 2 years and 10 months at a cutoff yield of 7.19 per cent, sources said. The issue included a base size of Rs 500 crore and a greenshoe option of Rs 500 crore. The issue received bids worth Rs 1,500 crore, three times the base issue, according to sources. The offering attracted strong interest primarily from mutual funds, given its shorter tenor, though there was some participation from insurance companies as well, sources further said. Additionally, sources indicated that the cutoff yield was 7–8 basis points lower than that of some leading private sector non-banking financial companies (NBFCs) operating in the same segment. ICICI Securities Primary Dealership was the sole arranger for the issue, sources said. 'Due to the escalation in tensions between India and Pakistan, yields on government securities had risen, leading to a corresponding spike in corporate bond yields. However, following the ceasefire announcement, G-Sec yields have rallied, while corporate bond yields have not seen a comparable recovery. In this context, Jio Credit managed to secure a tight cutoff despite it being a maiden issue—largely attributed to the strength of the brand. Typically, maiden issues carry a cut-off 5–10 basis points higher than regular issuances,' said Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP. In March, Jio Credit, which was earlier known as Jio Finance, was considering entering the domestic capital market to raise up to Rs 3,000 crore. However, the firm delayed the issuance as yields on corporate bonds were trending higher, and there was expectation of yields softening in the coming months. The company, in March, completed its maiden commercial paper issuance, raising Rs 1,000 crore at a yield of 7.80 per cent by selling commercial papers with a tenure of three months. Jio Financial Services is a core investment company registered with the RBI. It operates its financial services business through consumer-facing entities, including Jio Credit, Jio Insurance Broking, Jio Payment Solutions, Jio Leasing Services, Jio Finance Platform and Service, and Jio Payments Bank. Jio Credit has an asset under management (AUM) of Rs 10,000 crore as of March 2025. It offers home loans, loan against property, loan against mutual funds, and loan against shares. Additionally, it is also into vendor financing, working capital loans, and term loans among other things.
