Foreign portfolio investors (FPIs) continue to remain positive on Indian debt with the auction on Monday having received a strong response. Limits on Rs 7,396 crore were put up for auction on for all categories of FPIs. Bids came in for almost twice the amount Rs 14,285 crore with the highest bid for acquiring the limits touching 82 basis points.
The total number of bidders went up to 60 as against 23 during the previous auction.
The minimum price paid for acquiring limits on government securities hitting 44.05 basis points on Monday’s auction. This is almost four times the price that foreign investors were willing to pay during December’s auction when the minimum bid stood at 12.5 bps and the highest was 14 bp.It is noteworthy that, limits on only Rs 497 crore were available for auction in December.
In addition, Rs 7,500 crore of G-secs are available on tap for long term foreign investors. A limit of Rs 3,500 crore on SDLs is also available on tap. In January, a total of Rs 18,396 crore of limits on government securities and state development loans (SDLs) have been opened up for FPIs.
“I did not expect such a reasonable response from foreign investors this time considering last time’s response. However, we saw a good number of investors across spectrum this time,” a bond arranger said.
As far as G-sec limits for long term foreign investors are concerned, market participants believe it will be a while before foreign investors utilise the entire quota considering that sovereign wealth funds have been going slow with their investments on the back of falling crude prices that is hurting their fiscal positions.
In October’s auction, when additional limits were opened up for the first time since the Reserve Bank of India’s (RBI) announcement, the highest bid had gone up to 85 basis points and foreign investors bid Rs 17,266 crore against the available limit of Rs 5,600 crore. The lowest bid had come in at 66 basis points.
Foreign bankers had pointed out that a combination of attractive yields and a stable currency in India is one of the reasons why foreign investors continue to bet on the country’s debt market.
In the calendar year 2015, FPIs had bought close to $7.4 billion worth of Indian debt compared to the $26 billion bought in 2014. Market particiapants, however, believe demand for SDLs may remain a bit subdued. “It will be a bit difficult for the SDLs to see the kind of response it received in October’s auction when the entire amount was lapped up in a matter of three days,” the bond arranger pointed out.