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The Securities and Exchange Board of India will auction bonds worth $11.3 billion this month, following the hike in investment cap for FIIs in corporate and government debt markets by $5 billion each.
The auction for allocation of available debt limit after the increase in investment ceiling will be conducted for Foreign Institutional Investors on February 20 through an electronic bidding process.
Investment limit
The move follows a decision by the Reserve Bank of India to enhance the investment limit by FIIs in the long-term government debt securities by $5 billion to $15 billion and in the corporate non-infrastructure debt category to $25 billion.
The SEBI said in a circular that the 3-year lock-in period for the first time investment by FIIs in government securities has also been done away with.
Pursuant to the increase in investment cap, SEBI said the auction will be conducted for these additional limits along with the already available limit on February 20.
Auction process
The incremental limit of $5 billion (about Rs 27,000 crore) in the long-term government debt category will be auctioned along with the unutilised debt limit in this category as on January 31, 2013 (Rs 7034 crore), on February 20, 2013, taking the total available auction size to Rs 33,959 crore (over $6 billion).
Besides, the incremental limit of $5 billion in the non-infrastructure corporate bond segment would be auctioned as a separate category on February 20, 2013, SEBI said.
Collectively, investment limit worth about Rs 61,000 crore ($11.3 billion) would be auctioned on that day.
FIIs need to bid for investment limit in an auction conducted periodically by SEBI as per the available limit, pursuant to which they can invest in the bond market.
The market regulator said that the time period for utilisation of the government debt limit allocated through bidding process would be 30 days, while the time period for utilisation of the corporate debt limit would be 60 days.
FII investments
Indian markets witnessed robust interest from FIIs last year and the momentum has continued so far. FIIs have pumped in $785 million (Rs 4,196 crore) this year, after putting in $6.64 billion (Rs 34,988 crore) in the debt securities during 2012.
That was the highest annual net investment by FIIs in debt securities since 2010, when they had infused Rs 46,408 crore.
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