Foreign portfolio investors’ (FPIs) investments in the Indian debt market this year have almost reached $19 billion.
Foreign portfolio investors’ (FPIs) investments in the Indian debt market this year have almost reached $19 billion. So far in 2017, they have bought paper worth $18.8 billion with yield-hungry investors having almost fully utilised the investment limits available in both quotas — central government securities and corporate bonds. Compared to this, the Indian debt market had witnessed a net outflow of $964.31 million in the same period of 2016.
Latest depository data showed that the general category FPIs have utilised 99.03% of the permitted limit of Rs 1.87 lakh crore in central government securities, while long-term FPIs have utilised 83.11% of the allotted limit of Rs 54,300 crore. At the same time, foreign investors have utilised 99.05% of the permitted limit of Rs 2.44 lakh crore in corporate bonds.
Anindya Das Gupta, managing director and head of trading at Barclays India points out that there are small limits left in corporate bonds which are still being utilised by FPIs. Foreign investors have shown little interest in state development loans (SDLs) even as the utilisation remains at 7% of the permitted limit of Rs 28,500 crore.
“State development loans might see some inflows but it is likely to be limited as many foreign investors prefer to stick with sovereign and corporate bonds,” he said. Even as flows surged into the Indian market leading to the appreciation of the rupee, the Securities and Exchange Board of India (Sebi) temporarily halted all masala bond issuances till FPI investments in corporate bonds falls below 92% of the permitted limit.
Pradeep Khanna, MD and head of trading – Global Markets at HSBC India, indicates that at the current juncture only those firms that have already received RBI’s approval will be able to issue masala bonds. Bankers also believe that rupee’s direction going forward is more a function of the US dollar’s performance than local issues.