In Short:
Most foreign investors investing in Indian securities under the Fully Accessible Route (FAR) prefer bonds with a 5-10 year tenure. The total foreign investment in Indian bonds is only 4.8% of the total outstanding stock, with significant room for growth. The goal is to make the 5-10 year segment more liquid, aiding price discovery and reducing transaction costs. Global investor sentiment towards Indian securities is positive.
Foreign Investors Prefer Indian Securities with 5-10 Year Tenure: RBI
Hey there, good folks! Let’s talk about some interesting insights shared by Reserve Bank of India (RBI) deputy governor **Michael Patra**. According to him, the majority of foreign portfolio investors (FPIs) have a keen interest in Indian securities under the fully accessible route (FAR) when it comes to bonds with a tenure of up to 10 years.
Investment Preferences
Patra mentioned that a whopping 90% of total investment from FAR investors falls in the 5-10 years segment. On the other hand, only 2% of total stock of 30-year bonds are attracting their attention. Quite a difference, right?
Fresh Investment Regulations
Recently, the RBI excluded new securities with a 14-year and 30-year tenor from the FAR. This means that while existing securities in the secondary market are open to non-residents, fresh investments in these categories by FPIs will now have prescribed regulatory limits.
Demand Concentration
Interestingly, the demand for Indian securities has been mainly focused on bonds with tenures of up to 10 years. Patra mentioned that this is giving investors time to adjust their portfolios as the weight of India in the bond index gradually rises over a 10-month period.
Future Investment Opportunities
Despite the current scenario, there is still a vast opportunity for foreign investment in Indian securities. With the total stock of available investments under FAR standing at around ₹41 trillion and foreign investment only at ₹2 trillion, there’s still plenty of room for growth.
RBI’s Optimistic Outlook
RBI is hopeful that focusing foreign investments on the 5-10 year segment will enhance liquidity, aid in better price discovery, and reduce transaction costs as market depth increases. And the global investor sentiment regarding Indian securities remains “very high” and positive, according to RBI governor **Shaktikanta Das**.
So, keep an eye out for exciting opportunities in the Indian securities market and stay tuned for more updates on this front!
