Foreign investors’ appetite to acquire limits for Indian government securities seems to have gone down somewhat with the highest bid on Monday’s auction coming in at 62 bps against the 82 bps seen on October 12.
Against an available limit of Rs 852 crore that was put up for auction on Monday, FPIs put in bids worth Rs 1,678 crore — almost twice the notified amount. On October 12, however, foreign investors had put in bids worth Rs 17,266 crore to acquire limits on a notified amount of Rs 5,600 crore — three times the notified amount.
The cut-off on Monday’s auction stood at 55 basis points against last time’s figure of 66 bps while the number of bidders has fallen to 27 compared to 88 last time.
Indian government bonds are considered to be high value investments by foreign investors owing to a combination of high returns and reasonable stability vis-a-vis Western countries where yield is pretty low and other emerging market nations where stability is a concern.
FPI investments in Indian debt is almost double that of equities with foreign investors pouring in $8.78 billion in the country’s debt securities compared to the $4.6 billion invested in stocks in CY15. Although their investment in corporate bonds has been pretty tepid since the beginning of this fiscal, any limits on government securities made available for auction are immediately lapped up by FPIs.
In August 2014, foreign investors exhausted the maximum investment quota in G-Secs of $30 billion and, since then, the freed limits are put up for auction. Limits on G-Secs get freed due to redemptions or sale of G-Secs by existing holders in the foreign investor category. On Monday, the 10-year benchmark government bond yield fell by a basis point to 7.63%.