Investors Dump $2 Billion India Stock, Bond Funds After Budget

Investors Dump $2 Billion India Stock, Bond Funds After Budget

Investors withdrew 172.2 billion rupees ($2.5 billion) from Indian stock and company debt mutual funds in February as concerns mount about the sustainability of returns.

Corporate bonds saw the biggest outflow in about two years after the government last month announced a bigger-than-expected borrowing plan in its budget, triggering a spike in yields. Equity indexes, which benefit from a stimulus, surged to a fresh record, prompting local investors to book profits.

“The period of unusual returns is getting over,” said Vidya Bala, co-founder at Chennai-based research firm Primeinvestor.in. “Also, many investors could be waiting it out till the interest rate environment settles.”

Investors Dump $2 Billion India Stock, Bond Funds After Budget

Key Numbers:

  • Investors withdrew 67.5 billion rupees from corporate bond portfolios, biggest outflow in at least 23 months
  • Net withdrawals from stock funds were 104.7 billion rupees, eighth consecutive monthly outflow and biggest since November
  • Overnight and liquid funds received 167.8 billion rupees; money market funds got 95.8 billion rupees, indicating a preference for perceived safety
  • Data from Association of Mutual Funds in India, published Tuesday

Yields on top-rated rupee corporate notes maturing in three years jumped by 74 basis points to 5.61% last month, the biggest rise since 2013.

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