Infrastructure stocks rally as government relaxes norms for FIIs

MUMBAI: Shares of infrastructure companies surged higher as sentiments turned bullish in the sector after the finance ministry relaxed norms for the foreign institutional investors investing in long-term corporate bonds.

The government had raised the limit for FII investment in long-term corporate bonds issued infrastructure companies from $5 billion to $25 billion. However, investments by FIIs under this scheme were only $109 million or Rs 500 crore.

It was found that the three-year lock-in period and doubts regarding the interpretation of the requirement of residual maturity of five years were discouraging FIIs from investing in this scheme.

The government has now proposed to allow FIIs to invest in long-term infra bonds, subject to $5 billion limit, which have an initial maturity of five years or more at the time of issue and residual maturity of one year at the time of first purchase.

FIIs can, however, trade amongst themselves but cannot sell to domestic investors during the lock-in period of one year.

FIIs can also invest $17 billion in long-term infra bonds which have an initial maturity of five years or more at the time of issue and residual maturity of three years at the time of first purchase.

These investments are subject to a lock-in period of three years. During the three-year lock-in period FIIs can trade amongst themselves but cannot sell to domestic investors.

ARSS Infrastructure surged 13.39%, IRB Infrastructure Developers was up 5.06%, IVRCL Infrastructure rallied 4.13%, Marg gained 5.19%, Jaiprakash Associates moved 4.08 per cent higher and Patel Engineering rallied 3.17 per cent.