Money & Banking

FPIs bond with equities, dump debt this year

NARAYANAN V Chennai | Updated on December 23, 2020

Pump in ₹1.64-lakh cr in equities; ₹82,039 cr worth of bonds sold

The year 2020 has been a mixed one for the capital market from a foreign fund flow perspective. On the one side, record inflow into equities has pushed the broader markets into the stratosphere. On the other, a massive sell-off in sovereign and corporate bonds has been the worst as far as debt instruments are concerned.

Amid surplus liquidity in the global markets and expectation of fresh stimulus packages by various central banks, foreign portfolio investors pumped in a record ₹1,64,190 crore into Indian equities in the current calendar year. Of this, ₹1,35,843 crore (or 83 per cent) came only between October and December 23.

“Record inflows have been received in the Indian equity markets in the last three months. This is keeping in trend with the major emerging markets across the globe,” Juzer Gabajiwala, Director, Ventura Securities, said, adding, “with low interest rates, the risk-to-reward ratio is tilted in favour of the equity markets with many companies’ dividend yields being higher than the interest rates.”

 

Debt dilemma

Meanwhile, debt instruments witnessed a net outflow of ₹1,05,176 crore as on date in the current calendar year. After considering an inflow of ₹23,137 crore under the voluntary retention route (VRR), the net outflow from the Indian debt as on Wednesday stands at ₹82,039 crore, the highest for any calendar year.

According to Sanjay Chawla, Head of Research and Strategist, Emkay Global Financial Services, heightened inflation levels driven by higher food prices and supply-chain issues, concerns over higher-than-expected fiscal deficit and consequent increase in the supply of G-Secs and subdued expectations from the RBI about conventional rate cuts are some of the major factors for the massive pull-out by FPIs from the Indian debt market.

Published on December 23, 2020

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