FPIs buy Indian debt in February, focus returns on government debt: Nomura
MUMBAI: Foreign Portfolio Investors that seemed to be going little slow on the Indian debt have increased their holding in February, a Nomura report said.
FPIs (excluding long-term investors such as SWFs, central banks) increased their holdings of central government debt by Rs 5000 crore (after a reduction of Rs 288 crore in January) while longer term FPIs increased their holdings by Rs 40 crore (after a reduction of R310 crore in January). Consequently, the foreign participation rate in central government debt increased to 3.31% from 3.20% in January. However, this remains significantly below the 4% foreign participation rate seen around end-September 2016, the Nomura report said.
India had seen an outflow of investors for four consecutive months between October 2016 and January this year. The inflows were driven by central government bonds. Before February even central government bonds had seen outflow from FPIs.
According to the report, most of the inflows in central government bonds were seen around the RBI policy meeting on 8 February. Foreign investors increased their holdings of central government debt by Rs 286 crore (3 to 7 February) ahead of the meeting and after reducing their holdings by Rs 970 crore (8 and 9 February); they then turned into net buyers again, increasing their investments by Rs 249 crore.
On the other hand even state government bonds also saw substantial inflows. “State government bonds also experienced inflows of Rs 300 crore (after outflows of Rs 240 crore in January) while inflows in local currency corporate debt continued (Rs 380 crore from Rs 179 crore in January). This is the first instance of corporate debt receiving inflows in consecutive months since April 2015. In the 22 months from May 2015 to December 2016, corporate debt has experienced outflows in 17 months,” said Nomura report.
FPIs (excluding long-term investors such as SWFs, central banks) increased their holdings of central government debt by Rs 5000 crore (after a reduction of Rs 288 crore in January) while longer term FPIs increased their holdings by Rs 40 crore (after a reduction of R310 crore in January). Consequently, the foreign participation rate in central government debt increased to 3.31% from 3.20% in January. However, this remains significantly below the 4% foreign participation rate seen around end-September 2016, the Nomura report said.
India had seen an outflow of investors for four consecutive months between October 2016 and January this year. The inflows were driven by central government bonds. Before February even central government bonds had seen outflow from FPIs.
According to the report, most of the inflows in central government bonds were seen around the RBI policy meeting on 8 February. Foreign investors increased their holdings of central government debt by Rs 286 crore (3 to 7 February) ahead of the meeting and after reducing their holdings by Rs 970 crore (8 and 9 February); they then turned into net buyers again, increasing their investments by Rs 249 crore.
On the other hand even state government bonds also saw substantial inflows. “State government bonds also experienced inflows of Rs 300 crore (after outflows of Rs 240 crore in January) while inflows in local currency corporate debt continued (Rs 380 crore from Rs 179 crore in January). This is the first instance of corporate debt receiving inflows in consecutive months since April 2015. In the 22 months from May 2015 to December 2016, corporate debt has experienced outflows in 17 months,” said Nomura report.
