Foreign portfolio investors (FPIs) on Thursday bid for government securities (G-Sec) investment limits worth Rs 16,708 crore against Rs 18,437 crore on offer, according to sources.
Investment permits worth Rs 1,729 crore remained unsold in an auction conducted on BSE’s ebidXchange platform. The highest bid also came in at a token one basis point.
The demand shortfall and low bids were surprising considering robust FPI flows in the secondary market. So far in 2017, overseas investors have pumped in $13 billion in the domestic debt market.
Market players, however, said the demand shortfall was more due to lack of awareness regarding the auction.
“The exchange announced the auction on Tuesday evening. There wasn’t much time for the FPIs to complete the compliance process to participate,” said a bond dealer.
According to market players, there could be another around of bidding in the first week of July. Thursday’s auction, first in six months, was called after the FPI investment in G-Secs breached the 90 per cent utilisation levels.
FPIs had invested Rs 1.66 lakh crore in government papers, 90.03 per cent of the upper investment limit of Rs 1.85 lakh crore (all categories), as of June 14, National Securities Depository (NSDL) data showed.
According to the framework laid out by the Securities and Exchange Board of India (Sebi), an agency that monitors FPI investments in the country, FPIs have to buy permits once their investment limit hits 90 per cent. They are once again allowed to invest on an on-tap basis once the limit falls below 85 per cent.
At the start of the year, FPIs had utilised only 75 per cent of their G-Sec investment limit and 69 per cent of their limit in corporate bonds.