Foreign institutional investors (FIIs) made a comeback in the bond market and put in bids worth over $4.3 billion (about R25,680 crore) in an auction for debt securities worth $3.96 billion (about R23,650 crore) on Monday.
The robust response to the auction came despite FIIs having pulled out more than R17,000 crore (about $3 billion) from the Indian capital markets so far in July amid concerns over the depreciating rupee and the US Fed’s indication to cut down its monetary stimulus.
The auction was held at the top exchanges, the Bombay Stock Exchange and the National Stock Exchange, for allocation of FII investment limits in government debt securities worth R23,661 crore (about $3,957 million).
The auction attracted bids for R25,905 crore (about $4,332 million), according to the two bourses. As many as 51 bids were made in the auction, of which 50 were declared successful.
“Now bond market will take cues for monetary policy next week,” said Anoop Verma, money markets, DCB Bank. “If the stand of the Reserve Bank of India (RBI) is hawkish, then bond yields are expected to harden,” he said.
RBI will announce quarterly monetary policy on July 30. The latest auction followed robust interest shown by FIIs in the sale of government debt bond investment limits to the tune of R42,000 crore last month as well.
The outflows were to the tune of more than R11,196 crore (about $1.87 billion) from the debt market and over R 6,000 crore from equities.