The government on Friday increased the foreign institutional investment limit to $15 billion from $6 billion in domestic corporate bonds, a move that will provide a boost to foreign inflows into the country.
"In order to give a boost to the corporate bond market, (the) FII investment limit in rupee-denominated corporate bonds in India would be increased from $6 billion to $15 billion," the government said.
Analysts believe the government's move would enhance inflows from foreign funds, which are attracted by the high interest rates in the country.
"The raising of the FII investment limit would provide a boost to the foreign funds flow into the Indian corporate debt market. The move would be gradual and more inflows may be witnessed over the next coming months," Geojit Financial research head Alex Mathews said.
Further, domestic brokerage SMC Global vice-president Rajesh Jain said, "The move would lift FII sentiment and increase inflows into the Indian markets as the interest rates provided by domestic companies are high as compared to the global markets."
According to the information available on the Securities Exchange Board of India website, FIIs have put in nearly $3 billion in the country's debt market in 2008, despite pulling out as much as $13 billion from the equity markets.
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