Foreign portfolio investors (FPIs) continue to show interest in Indian bonds even as they lapped up the investment limits available for central government securities (G-secs) at Monday’s auction. Foreign investors put in bids worth `6,663 crore against a notified amount of `4,910 crore. In the previous auction, FPIs had bid for limits worth Rs 7,116 crore against a total notified amount of Rs 5,481 crore.
The highest bid in the auction stood at 4 basis points, while the cut-off stood at two basis points. Compared to this, the previous auction saw the highest bid at three basis points against a cut-off of 1.2 basis points.
The total number of bidders this time rose to 54 from 37 in the last auction held on August 14. 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.
According to latest depository data, general category FPIs have utilised 97.38% of limits available for central government securities while long-term FPIs have utilised 86.76%.
Corporate bond limits to the tune of `1,700 crore are set to be auctioned on Tuesday. FPIs have shown considerable interest in acquiring investment limits in corporate bonds ever since the auction mechanism kicked-off recently. In the previous auction, the cut-off bid had stood at 15.25 basis points.
The only limits that are yet to be utilised are those of state development loans. General category FPIs have used 9.44% of the available Rs 28,500 crore of investment limits. However, the limits exclusively available for long-term FPIs in SDLs still remain unutilised at Rs 4,600 crore.