Synopsis: Corporate bond and commercial paper issuances surged in FY26 up to October, supported by strong bank credit growth and improving market sentiment. Softening inflation, steady liquidity flows, and political stability continue to strengthen investor confidence.
Corporate India’s funding activity gained notable momentum this fiscal, with corporate bond issuances rising 8% YoY to ?6.3 lakh crore till October FY26, compared to ?5.8 lakh crore in FY25, according to an SBI Research report released on Sunday. The positive trend reflects renewed appetite for debt instruments amid improving macroeconomic conditions and stable interest rate expectations.
Alongside corporate bonds, commercial paper (CP) issuances grew 13% YoY, reaching ?9.8 lakh crore, up from ?8.6 lakh crore in the same period last year. The rise indicates increased short-term borrowing demand as firms tap into market liquidity.
On the banking front, all scheduled commercial banks (ASCBs) recorded a robust 16% YoY credit growth till October FY26. On a YTD basis, credit growth stood at 6.3%, while deposits grew 7.1% YTD and 2.6% YoY, highlighting the persistent gap between credit and deposit growth—an issue that calls for more proactive liquidity management.
Bank credit growth for the fortnight ending October 31 stood at 11.3%, while deposit growth edged up to 9.7%, indicating a steady flow of funds into the banking system.
- The report also highlighted shifting spreads across fixed-income instruments.
- The 10-year AAA corporate bond–G-sec spread has been narrowing since August, signalling improving credit confidence.
- Conversely, the 5-year bond spread widened in October.
- The Repo–CP rate spread, once negative during FY21, expanded to 114 bps in FY25, and stands at 90 bps in October.
The Repo–3-month CD spread, negative in FY21, climbed to 83 bps in FY25 and currently sits at 45 bps.
Meanwhile, mutual funds witnessed fresh inflows of ?1.33 lakh crore into short-term instruments in the last month—a sharp reversal from outflows seen in September and August. This shift indicates that investors are preferring short-duration assets amid evolving market dynamics.
Foreign portfolio investors (FPIs) have shown caution across emerging markets due to global volatility, but Indian debt segments have remained resilient, supported by strong macro fundamentals and ongoing reforms.
Market Sentiment Ahead: Domestic Cues Strong, Global Factors in Focus
As the Q2 earnings season concludes, analysts expect market sentiment next week to be shaped by services PMI, infrastructure output data, and political clarity following the NDA’s victory in Bihar.
Global sentiment will hinge on key U.S. economic releases, particularly the FOMC meeting minutes. Market watchers, including Ajit Mishra of Religare Broking, believe that volatility in AI-linked stocks will continue to influence global market movements.
Indian markets staged a strong rebound over the past week, with both the Nifty closing at 25,910.05 and the Sensex at 84,562.78, logging over 1.5% weekly gains. Lower GST rates, easing food inflation, and a sharp drop in retail inflation—from 1.44% in September to 0.25% in October—boosted investor confidence further. Wholesale inflation also declined to –1.21% due to softer crude and non-food prices.
Strong macro indicators, including a 7% rise in net direct tax collections to ?12.92 lakh crore, contributed to the upbeat mood. IT, pharma, and auto sectors led the recovery, while the Banking index hit a record high. Real estate stocks saw mild declines due to profit booking.
The India VIX fell nearly 5% to 11.93, indicating lower volatility and a more stable market outlook.
Disclaimer: This article is for informational purposes only and should not be taken as investment or financial advice. Readers should consult official reports or financial experts before making investment decisions.
