Foreign portfolio investors (FPIs) continue to show interest in Indian bonds, as they subscribed in large amounts to the limits for central government securities at Wednesday’s auction. Foreign investors put in bids worth Rs 29,950 crore against a notified amount of Rs 20,397 crore. The previous auction had been less of a success; FPIs had bid for limits worth only Rs 16,708 crore against a total notified amount of Rs 18,437 crore. The highest bid on Wednesday’s auction stood at four basis points, while the cut-off stood at 0.35 basis points. The total number of bidders was 76, compared with 33 in the last auction held on June 15.
Auctions are conducted when investment limits get freed up either due to redemption or sales in the market. The regulations stipulate that when 90% of the investment limit is reached, the rest of the quota must be auctioned.
Foreign investors usually bid aggressively to acquire limits on G-secs with the bid size mostly ranging in multiples of the notified amount. Indian debt is deemed attractive by FPIs given the lucrative yields; especially at a time when yields on sovereign bonds of some of the countries are in negative zone.
According to NSDL data as on July 4, FPIs have utilised 89.13% of limits available for central government securities in the general category. For the long-term FPI category, they have utilised 79.34%.
The Reserve Bank of India recently hiked the FPI investment limits in central government securities and has given more preference to long-term investors. According to the revised limits, FPIs in the general category are allowed to invest Rs 1.877 lakh crore while those in the long-term category are allowed to invest `54,300 crore. In total, FPIs can invest Rs 2.42 lakh crore in G-Secs.