Foreign institutional investors (FIIs) have responded enthusiastically to the government’s decision to increase the cumulative investment limit in corporate debt from $ 6 billion to $ 15 billion.
In an open bidding held at the National Stock Exchange today, 24 bidders were allocated investments of Rs 29,350 crore, the highest ever investment allocation by FIIs in India. In comparison, the net investment of FIIs in 2008 was only Rs 12, 069 crore. Since January 2009, FII’s net investment in debt instrument has fallen by 634 crore.
Standard Chartered Bank got the maximum bids of Rs 5,300 crore, followed by Barclays Bank Rs 5,050 crore, Kotak Mahindra UK Rs 4,150 crore and Deutsche Bank International Asia Rs 3,550 crore. The bids have to be executed in the next 45 days.
As per the Securities and Exchange Board of India (Sebi), $8 billion (Rs 41,000 crore) was available for allocation to FIIs and their sub-accounts in an open bidding platform.
| The top 5 FII bidders | |
| Name of the FII | Allocated amt (Rs in cr) |
| Standard Chartered Bank (Mauritius) Ltd. | 5,300.00 |
| Barclays Bank Plc | 5050.0 |
| Kotak Mahindra (UK) Ltd | 4150.0 |
| Deutsche Bank International Asia - Debt Fund | 3550.0 |
| JP Morgan Chase Bank | 2700.00 |
| Source: Sebi | |
Ashish Agarwal, executive director, A K Capital, said, “Interest rates abroad are quite low, which has made Indian debt more attractive to foreign investors.” For instance, corporate debt returns in the US are 1-1.5 per cent, whereas in India, the rates are as high as 8-9 per cent.
Similarly, the returns on government debt in the US are in decimal points, whereas in India, they are as high as 6-7 per cent. In fact, even PSU bonds fetch yields in the range of 9.30 per cent, which are about 300 basis points higher than 10-year G-Sec yields.
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FIIs will invest in attractive PSU bonds floated by quasi-government entities like Power Finance Corporation and Rural Electrification Corporation. “FIIs enjoy spreads of over 200 basis points after deducting all hedging costs for investments in PSU bonds here, which should keep these entities focused on India for a longer time" said Nagraj Murthy, Head-Fixed Income at Mirae Asset India.
The currency, which has been oscillating in the range of Rs 51 and Rs 52 against the US dollar, has begun to show signs of appreciation and climbed 20 basis points today.
Market experts said that today's bidding should kick off a sound FII investment trend in the coming days, as the US markets continue to weaken and yields of Indian PSU and corporate debt papers remain attractive.