FIIs load up on $20 bn in debt

Written by Aparna Iyer | Updated: Oct 10 2014, 10:49am hrs
FIIThe rush of dollars into Indian debt continues with foreign investors having pumped in $20 billion so far in 2014. (Thinkstock)
The rush of dollars into Indian debt continues with foreign investors having pumped in $20 billion so far in 2014, reports Aparna Iyer in Mumbai. This is twice the sum of the investments made by them in debt and equity in 2013. What will be heartening for the Reserve Bank of India (RBI) is that long-term investors such as sovereign wealth funds and pension funds have also been shopping for rupee bonds.

Data from the depositories show that such funds have exhausted 70% of the available $5 billion investment limit as of October 8; two months ago, only 45% of this limit had been used. On the back of such flows, the rupee has remained stable through the year, having gained 1.4% since January. On Thursday the rupee closed at 61.05 to the dollar.

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With the quotas for gilts exhausted, foreign portfolio investors are lapping up high-yielding corporate bonds; around 47% of the the limit of $51 billion has been used up compared with just 40% two months ago. The improving macroeconomic data along with a stable government has seen India continue to attract dollars. Moreover, hedging costs have been coming off; the onshore three-month forward premium implied yield has fallen 20 basis points in the last one month.