Foreign portfolio investors (FPIs) lapped up investment limits of Rs.332 crore in government debt with the highest successful bid placed at 40 basis points. Total bids placed amounted to Rs.521 crore. Eighteen bids emerged successful.
The BSE conducted the auction of Rs.332 crore government debt for FPIs on Monday during 15.30-17.30 hrs. The lowest successful bid was 36 bps, compared with 55 bps in the last auction held on November 2.
To boost foreign fund inflows into India’s capital markets, the regulator has allowed overseas entities to invest in government securities other than through the auction mechanism.
Norm relaxation
SEBI relaxed the debt allocation norms for FPIs, so that these entities can invest in government securities without purchasing debt limits till the overall investment reaches 90 per cent in the Government Debt Category (GDC). Once the limit is reached, the auction mechanism would be initiated for allocation of the remaining limits, as is now in place for corporate debt.
Earlier, RBI in its credit policy on September 29, had increased the investment limit in G-Secs available to FPIs to Rs.1.29 lakh crore from Rs.1.24 lakh crore in GDC with effect from October 12, and consequently to Rs.1.35 lakh crore from January 1, 2015.
The increased limit should be invested in G-Secs with minimum residual maturity of three years and no lock-in period. The FPIs are free to sell these securities to domestic investors. This move seeks to increase the participation of FPIs in G-Secs and boost the inflow of foreign funds into the country’s capital markets.
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