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The Government bonds are in focus


                                                  
The foreign institutional investors have shifted gears and focus from debt funds which mature in five year and boosted their investment focus on long term government bonds with maturity time frame exceeding well over two decades and this is a positive signal of their increased faith in the Indian economy .Nearly 45% of the limit was reached by July 24 when the government had reduced the investment limit to half from its earlier $ 10 billion solely because it remained hugely unutilized.

So the remaining balance of $5 billion was added to the regular category where the demand was very high among the FIIs investing in the Indian government securities with maturities of more than three years .Now the focus is on foreign central banks, sovereign wealth funds, insurance funds, pension funds as per the data of National Securities Depository ( NSDL). Some Foreign central banks have invested in India with the lot sizes to the tune of 500 K in a day under long term category.

The overnight rates in the U.S. are 0 to 0.25% while in India the prevailing rate is 8% , that’s the repo rate at which the banks borrow overnight funds from the Reserve Bank Of India. Amongst the emerging economy India is a much better bet comparatively as the reasons already pointed out in earlier posts , another plus point is the spread of around 800 basis points is always most attractive for the global investors. Even Franklin Templeton bought Rs 16,000 crores worth of bonds which is the largest which is the largest single day purchase of Indian govt securities.

This is a point to that unlike most of the concerns its not the case of borrowing money to invest, they invest through their regular inflows and reserves .This only shows that the great level of Global faith on the Indian economy.