Sebi caps FIIs' debt investment at $1bn

The Securities and Exchange Board of India (Sebi) has clarified that the total investment limit by foreign institutional investors (FIIs) in debt in India will be capped at $1 billion.

Regulatory sources confirmed rumours which have been circulating in the market and said the $1billion limit is cumulative and not an annual figure. This has been creating confusion among market participants.

So far on a cumulative basis, net investments by FIIs in domestic debt amounts to Rs 3819.6 crore ($848.8 million), while in the current calendar year, the FIIs' net investment in debt has been Rs 1482.6 crore ($329 million). In March alone, $202.5 million has been invested and in February it was at $10.1 million.

Last year, foreign institutional investors created a record when they made gross purchases to the tune of $1.03 billion in the bond markets in India.

Foreign institutional investors investing in the Indian debt mart are primarily lured by the higher yileds which they get here as opposed to their home countries.

This yoled becomes become more attractive withthe appreciation in the rupee, which is a current trend, and also the lower cost of hedging here.