Investors now prefer to invest in debt market: Assocham

New Delhi, Jun 23 (UNI) Due to volatility in equity market, investors are more inclined to park their surpluses towards debt market and mutual funds, according to Assocham.

''The global slowdown on account of high crude oil and food prices has caused turmoil in the capital markets. As a result, investors are looking for safe instruments in debt markets, even if the returns are lower,'' Assocham President Sajjan Jindal said.

Releasing the chamber assessment, the Assocham Chief said corporate bonds, mainly debentures issued by companies of good standard are being preferred to be subscribed by investors.

Debt market are becoming a fairly well segmented lot which includes government securities, corporate bond market, PSU bonds, fixed deposits and other such similar savings instruments, the chamber said.

The latest trends show that investors until about third week of June this year, in totality invested about Rs 1,600 crore in debts market as against less than Rs 1,200 crore in equities.

The chamber has pointed out that Foreign Institutional Investors (FIIs) have two routes to enter India. One is the 70/30 route for equity for FIIs can invest a maximum 30 per cent of money in debt here.

The second is the route for pure debt FIIs, where the foreign investor has to register with Securities and Exchange Board of India (SEBI) as an FII.

SEBI recently hiked the investment limit for FIIs in the government security market to 3.2 billion dollars from the previous ceiling of 2.6 billion dollars.

During the recent times, yields in government bond market have been on the rise.

''This coupled with the rising rupee and lower borrowing rates in the overseas market makes it lucrative for overseas investors to look at the Gilt market,'' the chamber said.

As of December 2007, the outstanding FII investment in government securities and treasury bills through the normal route was 326.64 million dollars.

UNI MP SG AS1537