MUMBAI: Waning investor trust in India's disturbed shadow lenders saves corporate debt demand.
Companies purchased 1.2 trillion ($17.3 billion) of bonds in the April-June period so far, down 57 percent from the past quarter and the weakest since the year-ago era, despite the decrease in borrowing expenses, according to Bloomberg's information.
Liquidity risk roared back this month in the nation's credit markets after non-bank financier Dewan Housing Finance Corp. postponed bond interest payments, a sign of industry stress that has persisted since IL&FS Group failed last year.
The crisis has struck appliance demand for vehicles, most of which were funded by shadow banks, and has led to the economy's slowdown.
"There is a crisis of confidence among investors," said Rajeev Radhakrishnan, Head of Fixed Income at SBI Funds Management. "An extended period of liquidity crisis which, if unresolved, could possibly lead to problems of solvency and the effect will not be isolated to particular institutions due to interlinkages."
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