Corporate bond limit auction sees lacklustre bids from FPIs

By: | Published: November 25, 2017 3:29 AM

The cut-off bid, or the lowest bid, that foreign investors submitted stood at 0.09 basis points

Foreign Portfolio Investors, Corporate bond limit auction, corporate bonds, Indian debt, corporate bond purchases, Bond dealers, inflationThe highest bid stood at just 2 bps compared to 5 bps in the previous auction, clearly indicating a sharp decline in sentiment.

Foreign Portfolio Investors (FPIs) showed tepid interest in acquiring limits for corporate bond purchases during Friday’s auction, as worries over inflation and the large auction limits weighed. The cut-off bid, or the lowest bid, that foreign investors submitted stood at 0.09 basis points on Friday, compared to 2.10 bps during the previous auction. The highest bid stood at just 2 bps compared to 5 bps in the previous auction, clearly indicating a sharp decline in sentiment. Bond dealers said concerns over inflation were an important factor, however, what perhaps had a greater bearing on the interest levels was the fresh investment limits worth Rs 17,001 crore set to be added from January 2018. Despite the weaker interest, though, the entire quantum of limits that was put up for auction was fully acquired by FPIs. Against a notified amount of Rs 8,314 crore, FPIs put in bids worth Rs 9,071 crore. In the previous auction, FPIs had put in bids worth Rs 12,005 crore against a notified amount of Rs 9,018 crore.

Not just the oversubscription, even the participation was lower this time with 46 bidders compared to 53 in the previous auction.
Auctions are conducted when investment limits get freed up either due to redemption or sales in the market. Latest depository data shows that FPIs have utilised 96.09% of the permitted quota of Rs 2.17 lakh crore in corporate bonds. Because of the limits being almost fully utilised, FPI fund infusion into Indian debt has been hovering close to the $23 billion mark in recent times. According to latest Bloomberg data, FPI investment into Indian debt stood at $22.7 billion.

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