The Securities and Exchange Board of India will set the date of auctioning the enhanced overseas investment limit in gilts and corporate bonds next week, an official at the regulatory body said.
Sebi will auction the limit in the next fortnight helping to cap bond yields, which are set to rise as inflation concerns resurface fuelling speculation of another rate hike at the November 2 RBI policy review.
India last month doubled overseas investment limit in gilts to $10 billion and in corporate bonds to $20 billion from $15 billion in a bid to attract more foreign inflows and widen investor base.
However, the enhanced limit was allowed for investments only in gilts and bonds of over 5-year maturity.
Overseas investors have bought $10.3 billion worth debt and $20.86 billion of stocks this year so far between January 1-October 6, as per Sebi data.
Debt market participants expect overseas investors to enthusiastically bid for the enhanced limit at least to buy government securities as they are more liquid and offer safer returns.
?Given the large number of FIIs and the amount of funds they are investing in our country, it will not be a surprise if FIIs bid for entire $5 billion in gilts,? said GA Tadas, MD & CEO at IDBI Gilts. Gilts rallied and rupee appreciated after the government’s move after the announcement on September 23.
By September 29, the 10-year benchmark yield fell to 7.87% from 7.96% on Sep 22, a day before the enhanced overseas debt limit announcement. ?It was taken as a good sign by the markets,” said a Ashok B Sharma executive vice-president at PNB Gilts. Tadas expects FIIs to overlook the restriction on investing in more than 5-year securities.