RBI to intervene if FIIs inflows are lumpy: Subbarao

Chandigarh: Keeping a watch on the record $22 billion foreign institutional investor (FII) investments in the booming Indian stock markets this year, the Reserve Bank of India (RBI) today said it will "intervene if the inflows are lumpy and volatile", reports PTI.

"We are watching the situation and our policy is clear.

We will intervene if (FII) inflows are lumpy and volatile or they disrupt macro economic conditions," RBI governor D Subbarao said after a meeting of central bank board here.

The cross-country foreign institutional investors (FII) have pumped in the highest ever $22 billion so far during 2010 calendar.

On 13th October, FII investment crossed the magical $22 billion or Rs 1 lakh crore in stock markets. The total inflows last year were $17 billion.

On robust foreign fund inflow, the rupee rose to touch a 25-month high of about 44 against the US dollar today, giving anxious moments to policy makers and exporters.

According to reports, the RBI had intervened yesterday by buying dollars in the foreign exchange markets to arrest the rise in value of rupee.

The sharp rise in FII flows to Indian stocks has pushed up the benchmark Sensex, which re-gained the psychologically important 20,000 mark in September, after a gap of 32 months.

Mr Subbarao's comments follow finance minister Pranab Mukherjee remarks in an interview to a private television channel ruling out curbing FII inflows.

SBI chairman O P Bhatt said in Mumbai that capital inflows would remain high for some time. But the market would be in a position to absorb them for the next 2-3 months.

"There are things like the disinvestment programme, the Coal India IPO due to which the money will keep coming.

The market will absorb for 2-3-months but I do not know what will happen after that," he said.

According to Ajay Sahai, director general of export body Federation of Indian Export Organisations (FIEO), the FIIs could be dissuaded to bring in the money by putting a six-month cap on repatriation of their funds.

"They (FIIs) should only be allowed to repatriate their investments after six months," he said.

After touching a monthly growth of about 36% in April this fiscal, the export expansion slowed to 22.5% in August reflecting uncertain recovery in the western markets.

The concerns on higher FII inflows have been heightened by the forthcoming mega IPO of Coal India Ltd, which is expected to garner about Rs15,000 crore (about $3.5 billion) with the involvement of FIIs.

"Situation which we are sensitive to, it (Coal India IPO) may put some pressure at least temporally," RBI deputy governor Subir Gokarn said. He was also here to participate in the board meeting.


Reliance Ind raises $1.5 bn from dollar denominated bonds

New Delhi: Reliance Industries (RIL) today said it has raised $1.5 billion from its first benchmark sale of bonds denominated in US dollars, reports PTI.

Billionaire Mukesh Ambani-run firm sold $1 billion of 10-year notes and $500 million of 30-year bonds, the company said in a press statement here.

Reliance Holding USA Inc, a wholly owned subsidiary of RIL, priced the 10-year notes at 205 basis points, or 2.05 percentage points, more than similar maturity US Treasury note and the 30-year bond at 240 basis points.

The two notes "will be denominated in US dollars, and will bear fixed interest of 4.50% and 6.25% per annum, respectively, with interest payable semi-annually in arrear," it said.

Reliance Holding will use the net proceeds to refinance existing debt, making other business investments and for general corporate purposes.

It had taken $765 million loan to purchase shale-gas properties in the US.

The company's chief financial officer Alok Agarwal said: "I am delighted with the outcome of this offering. It is truly a global benchmark supported by high quality accounts that believe in Reliance's credit and value creation story."

Banc of America Securities LLC, Citigroup Global Markets Inc, The Hongkong and Shanghai Banking Corp and The Royal Bank of Scotland plc acted as joint book runners and lead managers.

"The transaction priced through global comparables and was nearly 7.8 times oversubscribed with an order book aggregating $11.6 billion," the company said.

This is Reliance's first return to the global markets since its last dollar issuance in 1997 and its largest ever public market offshore bond offering.

"In terms of geographic distribution, the (10-year) 2020 notes were distributed 25% in Asia, 21% in Europe and 54% in the United States, while the (30-year) 2040 notes were distributed 27% in Asia, 18% in Europe and 55% in the United States," the release said.

The notes were distributed to high quality fixed income accounts: the 2020 notes were distributed 53% to asset managers, 22% to hedge funds, 10% to banks and private banks and 15% to insurance and pension funds, while the 2040 notes were distributed 58% to asset managers, 22% to hedge funds, 10% to banks and private banks, and 10% to insurance and pension funds.


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