Foreign portfolio investors pull $370m out of debt market

By Manish M Suvarna

Foreign portfolio investors (REITs) withdrew almost $369.37 million from the Indian debt market in February, after the government announced a higher borrowing program in the Union budget for the next practice. Also, the market was expecting an announcement about the inclusion of bonds in global indices, but that too did not happen. According to data compiled from NSDL, REITs withdrew $369.37 million in February from the debt market, down from $652.08 million in January.

Selling by REITs was also seen due to increased borrowing announced in the Union budget for the next fiscal year. This led to a sell-off in the bond market, pushing yields higher to a 30-month high. The government has planned market borrowing of 14.95 lakh crore and net borrowing of Rs 11.2 lakh crore to bridge the budget gap. On Wednesday, benchmark yields ended at 6.8145% on a sharp rise in crude oil prices. Portfolio investors actively invested in the Indian debt market in January, as they expected the government to announce the inclusion of Indian bonds in global bond indices. But feelings died down after the absence of such an announcement during the budget speech.

“The absence of any announcement of inclusion of Indian bonds in the global index in the budget speech and the increase in the government’s borrowing program led REITs to withdraw money from the Indian debt market They were net buyers in January as it was hoped that the inclusion of the Indian bond index would be announced in the budget,” said Lakshmi Iyer, CIO (debt) and chief product officer, Kotak Mahindra Asset Management Company.

RBI Governor Shaktikanta Das at the post-monetary policy press conference said the inclusion of Indian bonds could attract larger flows and could expose the country to a greater degree of currency risk. The inclusion of Indian bonds in global indices has also been delayed due to some inquiries from index providers such as JPMorgan Chase & Co regarding a tax issue.

Market participants said buying from REITs was not expected in March given rising policy rates globally, soaring crude oil prices and geopolitical tensions between Russia and Russia. Ukraine.

“The recent geopolitical turmoil may mean some vulnerability in emerging market currencies. So March may not see any meaningful buying from REITs,” Iyer added. They may also want to wait and watch for signals from the central bank to support an increase in government borrowing.

Tana T. Thorsen