In a move to stop the rupee’s fall, the Reserve Bank of India (RBI) on Monday announced a slew of measures that include an increase in the limit on foreign investment in government securities (G-Sec) by $5 billion to $20 billion while widening the investor base.
It also hiked the limit of External Commercial Borrowing (ECB) allowed for Indian companies to $10 billion.
However, the measures failed to have any significant impact on the rupee, which closed at Rs 57.01 against the dollar, compared with Friday’s close of Rs. 57.15. The markets were disappointed as Monday’s announcements failed to meet expectations built up over the weekend following the Finance Minister’s statement that strong steps to support the rupee would be announced.
In an effort to widen the non-resident investor base for G-Secs, Sovereign Wealth Funds (SWFs), multilateral agencies, endowment funds, insurance funds, pension funds and foreign central banks to be registered with SEBI have also been allowed to invest in G-Secs.
The RBI has also decided to allow qualified foreign investors to invest in infrastructure debt through mutual funds. “The single largest factor that will impress the equity markets and foreign investors will be measures to bring down the fiscal deficit and that hasn’t been addressed today. The increase in the ECB and G-Sec limits will be positive for the Indian rupee in the near term but are unlikely to have any immediate impact on the equity markets,” said Gautam Trivedi, Managing Director and Head of Equities, Religare Capital Markets.
The equity markets ended in the red as the 30-share Bombay Stock Exchange Sensex closed below the 17,000-mark, at 16,882.16, with a loss of 90.35 points or 0.53 per cent, after hitting the day’s high of 17,131.15.