|Follow us on:|
This is the biggest ever auction for such bonds and exceeds the previous record of over $7.15 billion auctioned in June.
The activity highlights a strong demand for government bonds despite a falling rupee and is in sharp contrast to reports of market concerns over foreign investments.
The auction was conducted by India market regulator Securities and Exchange Board of India (Sebi) on the stock exchange platform for FII investment limits in government debt securities worth $9.34 billion.
It received bids worth $10.4 billion.
The government recently hiked the investment limits for FIIs in government debt to $30 billion, from $25 billion previously.
39 successful bid were made in Tuesday’s auction.
FIIs, however, have pulled out more than $3 billion from the Indian capital markets in July amid concerns over the depreciating rupee that took a steep fall after the US Federal Reserve’s comments about ending US monetary stimulus.
In an interview to Indian business daily The Economic Times in August, the finance minister P. Chidambaram said US Federal Reserve Chief Ben Bernanke’s statements have added to the “confusion” for which emerging markets have paid heavily.
“With so many ifs and buts, Mr Bernanke need not have made that statement [on ending quantitative easing]. And since then, he has attempted to clarify it several times. But I am afraid, it has only added to the confusion,” Chidambaram said.
“In any event, a number of emerging economies have paid a price, including India. Other ministers from Brazil, Mexico, Chile, Turkey, and South Africa have all shared my unhappiness over the developments,” he added.
The rupee slumped to a lifetime low of 64.13 (intra-day) against the US dollar on Tuesday.
FIIs had been aggressive buyers of bonds in the first five months of 2013 on account of higher yields offered by the government and corporate debt.
The total foreign investor investment in the country’s equity market reached $15.35 billion since the beginning of 2013 up till May.
The FIIs need to bid for investment limits in an auction conducted periodically by SEBI as per the available limits, pursuant to which they can invest in the bond market.
SEBI auctions debt limits for FIIs is conducted on the 20th of every month.