Foreign Portfolio Investors Overturn Their Bullish Stance, Scale Back In October
Experts say RBI’s recent rate cut prompted outflows from the debt market.
Foreign investors have pulled out nearly Rs 7,500 crore from the Indian market this month so far, after pumping in a staggering amount in September.
Most of the funds have been withdrawn from debt markets during the period under review.
The recent rate cut by RBI is one of the factors for the outflow from debt markets. With downward pressure on bond yields, debt does not seem attractive. Besides, the new RBI governor’s dovish stance and flexibility to cut rates further, if needed, has helped in the debt outflow.Siddhant Jain, Chief Operating Officer, SAS Online
On October 4, the Reserve Bank slashed policy rate by 0.25 percent to 6.25 percent, a six-year low.
According to depositors' data, net withdrawal by FPIs stood at Rs 6,929 crore from the debt markets during October 3-21, while it pulled out a net sum of Rs 566 crore from the equities during the period under review, translating into total outflow of Rs 7,495 crore.
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The outflow comes following a net inflow of Rs 20,232 crore in the preceding month (September).
The outflow in equities could be attributed to a below-forecast reading on Chinese data that fanned fresh concerns about its economy. What clouded sentiment further was US Fed chief Janet Yellen's commentary on the US economy, indicating the need for aggressive steps to reboot it.
So far this year, FPIs have pulled out a net sum of Rs 4,487 crore from the debt markets, while they have pumped in Rs 50,727 crore in equities, resulting in a net inflow of Rs 46,240 crore.