FIIs put in bids worth Rs 39,000 cr to buy government bonds

The encouraging response came at a time when FIIs have been pulling out from Indian debt market heavily

Foreign investors put in bids worth Rs 39,000 crore ($6.7 billion) to buy government bonds, with a 93 per cent subscription in the largest-ever auction for such securities conducted by the Securities and Exchange Board of India.

The encouraging response, at the auction held yesterday at the BSE, came at a time when foreign institutional investors (FIIs) have been pulling out from Indian debt market heavily. So far in June, FIIs had made a net outflow of over Rs 21,000 crore from debt securities, after a net inflow of close to Rs 25,000 crore in the first five months of 2013.

Indian debt markets had witnessed robust interest from FIIs last year as well, when their net investments stood at close to Rs 35,000 crore. As against the grant of investment limits to FIIs in government debt securities at Rs 42,022 crore ($7.15 billion) in Thursday’s auction, the bids received from FIIs totalled Rs 39,171 crore ($6.7 billion).  This leaves an unsubscribed portion of Rs 2,851 crore, which could be auctioned next month.

A total of 37 FIIs had participated in the auction. It was the first auction for debt securities since a hike in the investment limits for FIIs in government debt to $30 billion, from $25 billion previously.

Besides, an expert committee recently recommended to Securities and Exchange Board of India's  (Sebi) that the regulator should further ease the regulations governing registration for FIIs and make it easier for them to invest in India. The proposals are likely to be discussed by Sebi's board next week.

The regulator's auction followed a robust response from FIIs to the sale of government debt worth Rs 5,533 crore last month, attracting bids worth more than  Rs 10,000 crore.

The FIIs need to bid for investment limits in an auction conducted by Sebi as per the available limits.

The auction is conducted on 20th of every month.