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FIIs invest Rs 35,000 crore in debt market in 2012; highest in 2 years

02 Jan 2013 Evaluate

Foreign investors have pumped in around Rs 35,000 crore in the Indian debt market in 2012 - the highest in two years. As per the data released by the market regulator Securities and Exchange Board of India (SEBI), foreign institutional investors (FIIs) were gross buyers of debt worth Rs 206,847 crore, while they sold bonds amounting to Rs 171,859 crore, a net inflow of Rs 34,988 crore ($6.64 billion).

The huge inflows into debt market can be attributed to the increase in the ceiling of both corporate and government bonds, together with declining rupee, which has depreciated by about 3.5% this year. The government has increased FII limits in government securities and corporate bonds by $5 billion each, taking the entire investment limit on domestic debt to $75 billion.

Since 2010, this has been the highest net investment by FIIs in debt securities, when they had infused Rs 46,408 crore. Further, FIIs have made a cumulative net investment of Rs 1.56 lakh crore ($33 billion) in the debt segment, since the opening up of Indian markets for FIIs in 1992. This huge inflow came regardless of the number of registered FIIs in India declining to 1,759, from 1,767 at the end of 2011. At 2012-end, there were a total of 1,759 FIIs registered with SEBI and 6,359 sub-accounts that overseas investors use to invest in India.

In order to boost investments in debt sector, the market regulator has taken a slew of measures. Earlier in September this year, SEBI allowed foreign investors to carry forward 50% of their debt holdings to the next calendar year. Further, it also allowed the FIIs to use the unutilized funds in corporate debt infra long-term bonds without obtaining its prior approval till the overall FII investments reaches 90% of the limit.

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