G-sec limits for FPIs oversubscribed

FOREIGN portfolio investors’ (FPIs) appetite for government securities (G-secs) continues to be reasonably strong with the limits at Monday’s auction oversubscribed, reports Bhavik Nair in Mumbai. FPIs bid for for

R6,810 crore worth of securities against the notified R5,035 crore. FPIs have been buyers in the secondary markets putting in $644.35 million in Indian paper over the last six sessions. On a year-to-date basis, however, FPIs remain net sellers of Indian debt at $889.60 million.

FOREIGN portfolio investors’ (FPIs) appetite for government securities (G-secs), continues to be reasonably strong with the limits at Monday’s auction oversubscribed. FPIs bid for `6,810 crore worth of securities against the notified amount of ` 5,035 crore.

FPIs have been buyers in the secondary markets putting in $644.35 million in Indian paper over the last six consecutive sessions. On a year-to-date basis, FPIs, however, remain net sellers of Indian debt at $889.60 million.

At the previous auction, FPIs had put in bids worth Rs6,463 crore against the notified amount of Rs4,681 crore.

However, the lowest bid came in at 3.32 basis points at Monday’s auction as against 4.41 bps last time. The highest bid or the highest price that FPIs are willing to pay for the limits stood at six bps against 20 bps seen at the last auction. The number of bidders was also lower at 37 this time around as against 41 in the previous auction.

FPIs across all categories are allowed to invest up to ` 1.35 lakh crore in central government securities. Auctions are conducted when the investment limits get freed up either due to redemptions or a sell-off. Regulations say when 90% of the investment limit is reached, the rest of the limit has to 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.

After the budget, bonds have rallied; the 10-year benchmark yield had fallen by 16 basis points in a single day after the government decided to stick to its fiscal deficit target of 3.5% for FY17. On Monday, the benchmark yield fell by two bps to 7.49%—the lowest level since July 2013.

The rupee has also been on an upward trend with the currency closing at 66.57 to the dollar on Monday.