BSE, NSE bar fresh IRF exposure to foreign investors

With the foreign investors' exposure to government debt reaching over 97 per cent of permitted limit of US $25 billion, they have been asked not to take any fresh investment position in the interest rate futures market.

In separate circulars issued on Thursday morning, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) said the total investment by overseas investments in government debt securities (through auction route) had reached Rs 1,21,224 crore.

This is 97.42 per cent of the total permitted limit of US $25 billion (Rs 124,432 crore, the exchanges said, citing data from depository NSDL (National Securities Depository Limited).

"FIIs/FPIs/QFIs are advised not to increase their long position in IRF (Interest Rate Futures) till the time the overall long position of FIIs/FPIs/QFIs in cash and IRF comes below 85 per cent of existing permissible limit," the BSE circular said.

A similar circular was issued by NSE. The different overseas investments operating in Indian markets include FIIs (Foreign Institutional Investors), FPIs (Foreign Portfolio Investors) and QFIs (Qualified Foreign Investors).

The position limits of these investors in exchange-traded Interest Rate Futures (IRFs) are monitored by the exchanges as per direction of regulator Securities and Exchange Board of India (Sebi).

The regulator has put in place a mechanism for monitoring and enforcing limits of FIIs in government securities and corporate bonds by directing depositories to disseminate information regarding the total FII investment values in such securities.

The mechanism requires stock exchanges to inform the depositories about the aggregate gross long positions in IRFs of all FIIs put together at the end of every trading session.

As and when the total cash and IRF of all FIIs reaches 85 per cent of the permissible limit, the depositories are required to inform RBI, Sebi and the stock exchanges.

Once 90 per cent of limit is utilised, FIIs are not allowed to further increase their long position in IRF till the time the overall long position of FIIs in cash and IRF comes below 85 per cent of existing permissible limits in the government bond segment.