$2.9-billion G-Secs to be auctioned for FPIs today

Investment limits worth Rs 18,437 crore ($2.9 billion) in government securities (G-Secs) meant for foreign portfolio investors (FPIs) will be auctioned on Thursday.
 
The first in a little over six months, it comes when the domestic debt market is seeing robust foreign investment. FPIs had, as on Tuesday, invested Rs 1.66 lakh crore in government paper, about 90 per cent of the upper investment limit of Rs 1.85 lakh crore (all categories), shows data from the National Securities Depository.
 
The Securities and Exchange Board of India (Sebi) rules say FPIs have to buy permits once their investment limit hits 90 per cent. They’re allowed to again invest on an on-tap basis once the limit again falls below 85 per cent.
 
Thursday’s auction will be carried out by the BSE, on its ‘ebidxchange’ platform from 3.30 pm to 5.30 pm, the exchange said.
 
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. However, inflow of $13 billion since January 1 has led to the exhausting of most limits.
 

Source: NSDL

“With FPI flows remaining strong, there could be good demand at the auction. Also, FPIs now have more comfort thanks to the stability in India’s macro numbers including inflation and currency,” said Ajay Manglunia, head–fixed income, Edelweiss Capital
 
Sources said at a meeting last week, Sebi told FPIs they could invest up to 100 per cent of the available limit in corporate bonds on-tap. Further, that once the limit was fully utilised, Sebi would look at further enhancing it.
 
India allows FPIs to hold domestic corporate bonds worth around $51 bn and another $35 bn worth of central government bonds.
 
The unprecedented flow into the debt markets this year saw most of the available limits getting lapped up, except state development loans, where FPIs have used only six per cent of the available limit.
 
“One reasons for the high FPI flow in debt is that India has been one of the prime beneficiaries of increased foreign flows in emerging markets as a whole. We have seen substantial FPI flow across the Asia-Pacific region in the past six months. Beside, improvement in India’s macro variables, including inflation and currency stability, has helped attract foreign flow,” said Manish Wadhawan, head-interest rates, HSBC India.
 
Indonesia and South Korea have seen huge FPI flow into debt so far in 2017, at $8 bn and $21 bn, respectively.