FPIs withdraw $1 billion from bond market in six sessions

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Updated: May 8, 2019 2:51:39 AM

Dealers also believe foreign investors could be pulling out to re-invest through the newly formed voluntary retention route (VRR), which makes investments through the route free of regulatory norms applicable to FPI investments in debt markets, provided investors maintain a minimum share of their investments for a fixed period.

FPI, bond market, six session, Foreign portfolio investors, VRR, voluntary retention route, debt markets, investors, FPI investment, market newsFPIs withdraw billion from bond market in six sessions

Foreign portfolio investors (FPIs) have pulled out nearly $1 billion from the bond markets in the past six trading sessions. Coupled with the outflows in the previous months, FPIs have sold over $3.8 billion this calendar year so far. However, the old benchmark yield — 7.17% yielding notes maturing in 2028 — fell by nine basis points (bps) over the past six trading sessions and closed two basis points lower at 7.47% on Tuesday.

According to bond market experts, the outflows can be attributed to withdrawals due to older bonds maturing in this period while investors seek more clarity on the political front before making any major decisions. Dealers also believe foreign investors could be pulling out to re-invest through the newly formed voluntary retention route (VRR), which makes investments through the route free of regulatory norms applicable to FPI investments in debt markets, provided investors maintain a minimum share of their investments for a fixed period.

“We have seen close to Rs 13,000 crore enter the markets through this route which will be reflected in the coming months,” said a dealer.
On May 3, FPIs sold a net $628.58 million of debt — the highest one day net outflow since December 2016 — according to data from NSDL. FPI utilisation of government securities quota has remained sluggish in recent times. Latest data shows that FPIs have utilised only 63.31% of their quota in government securities that currently stands at Rs 2.34 lakh crore. For corporate bonds, foreign investors used 69.23% of their quota of Rs 3.03 lakh crore.

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