Foreign institutional investors (FII) on Friday lapped up quotas to buy both gilts and corporate bonds as Sebi successfully auctioned about R61,500 crore ($11.8 billion) worth of debt allocations, according to dealers in the debt market.
The auction followed the government’s decision to increase the ceiling for investments in gilts to $15 billion and corporate debt to $20 billion.
A total of R25,300 crore worth of gilts, R26,100 crore of corporate debt and another R2,200 crore worth of unutilised portion of existing long-term gilts (with a residual maturity of more than five years) were auctioned.
The total bids for gilts amounted to R39,500 crore,dealers said, while those for corporate bonds amounted to R34,100 crore and long-term gilts R2,248 crore. The bond purchase limits are awarded to the highest bidder; the premium or fee paid for gilts was 115 basis points while for corporate and long-term gilts, they were 67 bps and 12 bps, respectively. So, for an amount of $100 million, investors are willing to pay 1.15% as a fee to the government.
NS Venkatesh, head of treasury at IDBI Bank, said: ?FIIs showing so much interest is a positive sign for the bond as well as the forex market. ?This will help bring down yields and support the rupee.? FIIs will have to utilise the fresh limits for gilts within 45 days of allotment and for corporate bonds in 90 days.
On November 17, the government had upped the investment limits for both gilts and corporate bonds with a view to atttracting more foreign investment in the wake of the falling rupee. ?The policy has been reviewed in the context of India?s evolving macroeconomic situation, the need for enhancing capital flows and making available additional financial resources for India?s corporate sector,? the finance ministry said.