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Aggressive Bidding by FPIs For Indian Bonds; Lapped Up the Investment Limit

Foreign portfolio investors (FPIs) continue to show interest in Indian bonds, as they subscribed in large amounts to the limits for central government securities at Wednesday’s auction.

Foreign investors put in bids worth Rs29,950 crore against a notified amount of Rs20,397 crore. The previous auction had been less of a success; FPIs had bid for limits worth only Rs16,708 crore against a total notified amount of Rs18,437 crore. The highest bid on Wednesday’s auction stood at four basis points, while the cut-off stood at 0.35 basis points. The total number of bidders was 76, compared with 33 in the last auction held on June 15.

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. 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 negative zone.

According to NSDL data as on July 4, FPIs have utilised 89.13% of limits available for central government securities in the general category. For the long-term FPI category, they have utilised 79.34%.

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