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FPIs deploy more cash into Indian debt than equity for the first time in CY2014.
India attracted debt inflows worth US$26 bn in CY2014, surpassing equity inflows for
the year (US$16 bn). Almost half the capital was deployed into sovereign paper
(US$14 bn) while financial services debt instruments attracted a substantial chunk as
well (US$4.9 bn). With inflationary concerns easing and softer global commodity pricing
sweetening expectations for India, foreign funds and money managers have already
utilized all of the government debt limits and a majority of the corporate debt limits.
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FPI debt investments overshadow equity inflows—sovereign paper attracts ~US$14 bn
Foreign portfolio investors have pumped in ~US$26 bn into Indian debt securities in CY2014,
surpassing the equity inflows (US$16 bn) during the period. As can be seen in Exhibit 1, FPI
debt inflows into India have never surpassed equity inflows prior to CY2014. We further classify
the debt inflows into various sectors in Exhibit 2. Sovereign paper attracted more than half the
inflows (US$13.9 bn) with financial services attracting another US$4.9 bn. The ‘others’ category
makes up a large portion of the CY2014 inflows and essentially comprises companies left
unclassified by the BSE. Exhibit 3 shows us the top-10 companies in this particular category and
includes prominent names like Exim Bank, Food Corporation of India and Emaar MGF.
Debt utilization limits—government debt limits mostly utilized; corporate debt headroom drops
The total outstanding sector-wise debt asset under custody (AUC) is showcased in Exhibit 4.
FPIs own debt instruments worth US$9 bn in the financial services sector, which has doubled
over the year. Sectors like utilities, telecommunication, metals and mining, media and construction
materials saw a proportional jump in FPI AUC during the year. The change in the debt
utilization status gives a clearer picture of the CY2014 activity in the segment (see Exhibit 5).
In CY2014, the total government debt limits are mostly exhausted via the auction route.
The available headroom in government debt is available only to FIIs registered with SEBI under
the category of sovereign wealth funds, foreign central banks, pension funds, endowment
funds, insurance funds and multilateral agencies. Corporate debt limits have also been used
extensively with 59% of the total limit already exhausted. Cumulatively, almost 75% of the
total debt limit has already been utilized by FPIs.
Market participants—foreign mutual funds, investment managers and central banks lead
The total FPI debt AUC increased to US$44 bn by October 2014 (from US$20 bn in December
2013). Foreign mutual funds and investment managers were cumulatively responsible for 42%
of the CY2014 debt inflows (see Exhibit 6). A substantial portion of the foreign mutual fund
participation was seen in 2HCY14. Although strategic investors like foreign central banks
increased their exposure to Indian debt instruments (to US$6.6 bn from US$2.5 bn in December
2013), other ‘stickier’ investors like sovereign wealth funds and pension funds have not
participated in the debt segment with the same fervor. Considering the uncertain investment
horizon of the active market participants (especially foreign mutual funds), the recent debt
inflows cannot be considered ‘sticky’ in nature.
link
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily31122014ar.pdf
FPIs deploy more cash into Indian debt than equity for the first time in CY2014.
India attracted debt inflows worth US$26 bn in CY2014, surpassing equity inflows for
the year (US$16 bn). Almost half the capital was deployed into sovereign paper
(US$14 bn) while financial services debt instruments attracted a substantial chunk as
well (US$4.9 bn). With inflationary concerns easing and softer global commodity pricing
sweetening expectations for India, foreign funds and money managers have already
utilized all of the government debt limits and a majority of the corporate debt limits.
��
FPI debt investments overshadow equity inflows—sovereign paper attracts ~US$14 bn
Foreign portfolio investors have pumped in ~US$26 bn into Indian debt securities in CY2014,
surpassing the equity inflows (US$16 bn) during the period. As can be seen in Exhibit 1, FPI
debt inflows into India have never surpassed equity inflows prior to CY2014. We further classify
the debt inflows into various sectors in Exhibit 2. Sovereign paper attracted more than half the
inflows (US$13.9 bn) with financial services attracting another US$4.9 bn. The ‘others’ category
makes up a large portion of the CY2014 inflows and essentially comprises companies left
unclassified by the BSE. Exhibit 3 shows us the top-10 companies in this particular category and
includes prominent names like Exim Bank, Food Corporation of India and Emaar MGF.
Debt utilization limits—government debt limits mostly utilized; corporate debt headroom drops
The total outstanding sector-wise debt asset under custody (AUC) is showcased in Exhibit 4.
FPIs own debt instruments worth US$9 bn in the financial services sector, which has doubled
over the year. Sectors like utilities, telecommunication, metals and mining, media and construction
materials saw a proportional jump in FPI AUC during the year. The change in the debt
utilization status gives a clearer picture of the CY2014 activity in the segment (see Exhibit 5).
In CY2014, the total government debt limits are mostly exhausted via the auction route.
The available headroom in government debt is available only to FIIs registered with SEBI under
the category of sovereign wealth funds, foreign central banks, pension funds, endowment
funds, insurance funds and multilateral agencies. Corporate debt limits have also been used
extensively with 59% of the total limit already exhausted. Cumulatively, almost 75% of the
total debt limit has already been utilized by FPIs.
Market participants—foreign mutual funds, investment managers and central banks lead
The total FPI debt AUC increased to US$44 bn by October 2014 (from US$20 bn in December
2013). Foreign mutual funds and investment managers were cumulatively responsible for 42%
of the CY2014 debt inflows (see Exhibit 6). A substantial portion of the foreign mutual fund
participation was seen in 2HCY14. Although strategic investors like foreign central banks
increased their exposure to Indian debt instruments (to US$6.6 bn from US$2.5 bn in December
2013), other ‘stickier’ investors like sovereign wealth funds and pension funds have not
participated in the debt segment with the same fervor. Considering the uncertain investment
horizon of the active market participants (especially foreign mutual funds), the recent debt
inflows cannot be considered ‘sticky’ in nature.
link
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily31122014ar.pdf
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