The mad rush to acquire limits on Indian government securities ( G-secs) by foreign portfolio investors (FPIs) continues to fall even as the highest bid on Monday’s auction stood at 40 basis points against the 62 bps seen during last auction.
Indian government bonds are considered to be high-value investments by foreign investors considering the combination of high returns and reasonable stability vis-a-vis western countries where yield is pretty low and other emerging market nations where stability is a concern.
Against an available limit of Rs 332 crore that was put up for auction on Monday, FPIs put in bids worth Rs 521 crore. However, on November 2, foreign investors had put in bids worth Rs 1,678 crore to acquire limits on a notified amount of Rs 852 crore.
The cut-off has fallen to 36 basis points against last time’s figure of 55 bps, while the number of bidders dipped to 25 compared to 27 on November 2.
In 2015, FPI investments in Indian debt stands more than double that of equities with foreign investors pouring in $8.39 billion into Indian debt compared to $3.73 billion in stocks.
Although their investment in corporate bonds has been pretty tepid since the beginning of this fiscal, limits on government securities are immediately lapped up even as they come up for auctions.
In August 2014, foreign investors exhausted the maximum investment quota in G-secs.
Since then, whenever the limits get freed owing to redemption or sale of securities, an auction is conducted to allot the freed limits to FPIs.
On Monday, the ten-year benchmark government bond yield rose two basis points to 7.72%.