Vast response to SBI bond issue

Feb. 24, 2011 - PRLog -- The bond issue of India's lagest bank State Bank of India has been subscribed 17 times on the back of overwhelming response from investors.
CNBC-TV18’s Managing Editor Udayan Mukherjee is not at all surprised by the overwhelming response. “I think the flavour of the market right now is fixed maturity plans,” he adds.
Here is a verbatim transcript of Udayan Mukherjee comments on CNBC-TV18. Also watch the accompanying video.
I am not surprised at all. When you get SBI bond in this kind of a market environment at that kind of coupon rate for so many years, I think high networth individuals (HNIs) would want to lock in money at that kind of rate. I think the flavour of the market right now is fixed maturity plans. Equity markets are too volatile. HNIs are saying I can get maybe tax adjusted 9.5-10% on FMPs, State Bank is giving nearly double digit returns for so many years locked in, I need to put some money out there. So, I am not surprised at all that HNIs have found the SBI bond issue very attractive.
SBI, I think that holds the key to the market from here. We are getting close to a budget, if there is something about the fiscal deficit or the government’s borrowing programme, which the market does not like, you will see the impact on the bond prices, yields and consequently you might see pressure on the banks. This rally from 5,200 has been led by outperformance in the bank Nifty. That was the first sector to bring the market down in November that was a sector which led the pullback rally in the first place.
If that begins to sell off now because of inflation and interest rate and bond market fears or macro concerns surrounding around oil then this market will struggle a lot to hold on to that 5,400 level. So, between now and post budget movement, if State Bank of India is not trading at Rs 2,600 plus then 5,400 will be very difficult to defend for the Nifty. Conversely, if those stocks tend to be constructive then this market probably manages to hold 5,400.

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