Official data shows that foreign institutional investors (FIIs), who bought Indian debt instruments worth Rs 22,000 crore during Jan-May 2013, sold Rs 32,336 crore worth of such papers in June.
The heavy selling of debt instruments by FIIs led to a fall in bond prices and rise in bond yields. Yield on the 10-year government bond rose to 7.46 per cent, from 7.11 a month ago. This led to a negative monthly return of 1-2 percent in debt funds.
Investors who entered long-term debt funds recently, anticipating a further rate cut by the Reserve Bank of India, were caught unawares by the US Fed’s announcement that it would taper quantitative easing, reports indicate. Following this, FIIs who invested in the emerging market debt instruments, started withdrawing the same on a massive scale.
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