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The Securities and Exchange Board of India (Sebi) has permitted foreign investors to reinvest in government bonds the same day, giving them the option to churn their portfolio, according to four traders with direct knowledge of the matter and an email of the new rules.
Sebi, in an email sent on Wednesday to custodian banks of foreign investors, said the facility to buy and sell government bonds the same day would be applicable on the entire $30 billion ceiling on government debt purchases. Currently, the entire government bond limit for foreign investors is almost fully exhausted.
“Upon sale or redemption or maturity of government securities the FPIs (foreign portfolio investors) shall be permitted to buy government securities on the same day,” Sebi said in the email.
While currently foreign investors get a five-day window to reinvest government bonds if they have purchased the limit by paying a fee at the auction, the current rules will be applicable when the limits are freely available, traders said.
The limits were auctioned since September when the quota was 90 per cent used up.
