• Rajasthan

    Cong 99
    BJP 73
    RLM 3
    OTH 24
  • Madhya Pradesh

    Cong 112
    BJP 108
    BSP 2
    OTH 5
  • Chhattisgarh

    Cong 67
    BJP 15
    JCC 7
    OTH 0
  • Telangana

    TRS-AIMIM 95
    TDP-Cong 21
    BJP 1
    OTH 2
  • Mizoram

    MNF 26
    Cong 5
    BJP 1
    OTH 8

* Total Tally Reflects Leads + Wins

FPIs show strong appetite for G-Secs, bid for R6,821 crore

By: | Published: September 27, 2016 6:15 AM

The appetite of foreign portfolio investors (FPIs) for government securities (G-Secs) seems to be reasonably strong, with the limits at Monday’s auction being oversubscribed by a fair amount.

The appetite of foreign portfolio investors (FPIs) for government securities (G-Secs) seems to be reasonably strong, with the limits at Monday’s auction being oversubscribed by a fair amount.

FPIs bid for R6,821-crore worth of securities against the notified amount of Rs 4,615 crore. According to sources, the lowest successful bid on Monday came in at 3.37 basis points, against 0.01 bps last time.

At the previous auction, FPIs had put in bids worth R7,494 crore against a notified amount of R7,046 crore.

pg 10 graphSo far this year, FPIs have been sellers in the secondary markets, selling $630.20 million in Indian paper since the beginning of 2016. However, going by the subscription seen at Monday’s auction, demand for Indian paper seems to be picking up.

In fact, since the beginning of September, FPIs have net bought Indian debt securities worth $780.72 million and were sellers in only three of 15 trading sessions.

Given the prevalent high demand for domestic debt instruments, yields on government bonds have been declining over the past few months. The 10-year benchmark yield currently stands at 6.79% – new series – having fallen over 70 bps in the last six months.

pg 10 graph 2In fact, the yield has fallen by as much as 10 bps over the last one week.FPIs across all categories are allowed to invest up to R1.44 lakh crore in central government securities. Auctions are conducted when investment limits get freed up either due to redemption or a sell-off.

Regulations say when 90% of the investment limit is reached, the rest of the limit has to be auctioned. According to data on the NSDL website, 96.76% of the investment limit has been utilised.

Foreign investors usually bid aggressively to acquire limits on G-secs with the bid size mostly ranging in multiples of the notified amount. Indian debt is deemed attractive by FPIs given the lucrative yields; especially at a time when yields on sovereign bonds of some of the countries are in the negative zone.

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