Government debt quota sale to foreign investors watched

Mon May 20, 2013 10:50am IST

A man uses an electronic machine to check a rupee note at a money exchange shop in Siliguri February 5, 2008. REUTERS/Rupak De Chowdhuri/Files

A man uses an electronic machine to check a rupee note at a money exchange shop in Siliguri February 5, 2008.

Credit: Reuters/Rupak De Chowdhuri/Files

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Reuters Market Eye -India will sell 55.33 billion rupees worth of government debt limits to overseas investors later on Monday, the first after the country cut the debt withholding tax for foreign investors last month.

These quotas give foreign investors the right to invest in debt up to the limit bought.

India cut tax rates for foreign investors on interest income from investments in government and corporate debt to 5 percent from 20 percent, hoping to attract more funding to bridge its current account deficit and polish its reformist credentials.

Dealers say demand for the debt limits is expected to be strong as sharply easing inflation has spurred hopes the Reserve Bank of India would cut interest rates as early as its next policy review in June.

However, Standard & Poor's reiteration on Friday of its "negative" outlook on India's credit rating could weigh on sentiment.

The amount of debt quotas being auctioned on Monday is a fraction of the 291.08 billion rupee limits sold in April, which attracted heavy bidding from foreign investors.

The benchmark bond yield rises 2 bps to 7.42 percent and the new 10-year paper is up 3 bps at 7.19 percent.

(Reporting by Archana Narayanan)

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