Raising FII debt limit may have worsened rupee woe: Kotak

Moneycontrol Bureau

The government Wednesday raised the investment limit for foreign institutional investors (FIIs) in government bonds by USD 5 billion to USD 30 billion, in an attempt to attract foreign capital and shore up the rupee.

Brokerage house Kotak Securities in its note prior to the announced has argued that raising FII investment limit in debt was a short term measure and not an effective solution to the rupee's problems.

FIIs have net sold government bonds worth over Rs 15,000 crore in the last three weeks.

"The exodus of foreign capital from debt markets has accelerated the Rupee’s plunge over the past few days," said the Kotak note to clients.

"This exposes the inefficacy of measures taken by India to shore up its current account deficit problems-higher limits for overseas investments in Indian debt. The Government has steadily increased debt limits to attract more foreign flows but this has backfired," said the Kotak note. 

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