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Charts & Analysis

US 10 year Hits 3%, FIIs Take Out 73K Cr. in 3 Months

And that’s the highest in over 2 years:


And in the process, the world’s largest mutual fund takes a $41 billion loss.

Impact: To us, the problem is of dollar outflows. Already, we have over 73,000 cr. exit the Indian capital markets (debt+equity) since June.

Net Monthly FII Investment

Note, this is SEBI Data, and is only updated till Tuesday evening, before the historic Rajan speech. Yesterday, banks went up 10%, and it’s likely FIIs bought to reverse September to a positive number.

Will it get worse on 17th/18th after the FOMC meeting? Will Rajan raise rates on the 20th? Will inflation come in high on the 12th and the 15th? Will IIP show more degradation?

The impact of a rising US 10 year yield will be apparent only when there is more definitive action, both from the US and India. The Indian 10 year yield meanwhile is at 8.4% and the dollar at 66.

  • Leo says:

    YES THE GAME IS UP it is going to 8% or higher … BEN AND MMS and all his goons cant do anything now it has broken out of 33 year triangle ..LETS SEE how it plays out

  • mangoman says:

    33 year triange???
    oh my god..Ben can easily bring this down….so I wish Ben will not take positions here..
    But I want to see the MMS and Chidu and his cronies to suffer

  • mangoman says:

    If US jobs report comes very good, it would be great for the country. ..we need to clear all th excesses…

  • Harish says:

    Do not worry there will no tapering …………

    • Leo says:

      sir dont worry nothing will happen… i feel that people think they are in control …they are not …i am 100% sure of this ..the cycles cant be beaten ..backtested in for last 100 years
      THE FED Is telling banks to be careful … they wont back stop them on bets on interest rates.BTW the bond mkt is very big rates rise 3+ odd people in fixed income will start shivering …

  • Leo says:

    i dont even understand why people importance to taper … every country is printing Including india at different levels.It is causing capital around the world to go nuts .So when they start loosing faith u will have what u saw in YES BANK 500 to 200 in no time or like gitanjali gems.
    Biggest indicator is GOLD and crude and ofcourse an eye on bond yields
    also yields started rising before taper talk it just accelerated after the meeting .Greece was all good till decemeber 2009 suddenly everyone saw yields spike in next 3 months.
    So dont waste time in taper no taper watch the price movement in yields it is a debt crisis and not some stock mkt thing .

  • DJ says:

    No way Rajan is going to be raising rates. I think he is going to define a new non-food inflation index and he is going to clarify what the target is going to be on this non-food inflation index. He is going to lay the blame of food inflation on the govt (and I think rightfully so). Having made clear the policy goal, he might keep rates steady and signal that he’s going to cut, or he might cut rates right away.
    At least, I hope this is what he does, based on this:
    I think the policy clarification is the most important thing right now.

    • Leo says:

      Well why people say central banks are in control … when infact theyields started rising before the taper talk 1.27 to 2.9 …
      RAJAN also is not in control if he drops rates inflation will spike further they tried last year total disaster yields jumped 250 bps in no time .Started printing again…but once US 10 year moves above 3.1 odd there is no stopping.Gsec 12% coming i think lets see what happens.Btw he hated krugman if i am not wrong .I would be surprised if he cut rates

      • XYZ says:

        Yes, Krugman put him down. Rajan wants to raise rates but I am not sure if he will be allowed to do that.

      • DJ says:

        I’m uncontrollably contrarian. 🙂
        It might be a quarter too early though for a rate cut. But, the case is made out by Surjit Bhalla quite accurately. The problem is the policy is not clear. If it was made as clear as Bhalla does, its common sense and everyone would be expecting it. That’s the only reason why I think he might hold one time before cutting the next time. But, it wouldn’t surprise me if he cut rates right away.
        I’ve been resisting the “imminent rate cut” crowd for 2-3 years. Now, I’ll go the other way, if for no other reason but that the consensus expects a rate increase.
        No one can deny that a rate hike now makes much less sense than last year or the year before. Lets see.

        • If he actually cuts rates I’ll probably go seriously long and then set up for the biggest short opportunity of my life 🙂
          Bhalla’s rate cut theory is very shaky. Inflation measurement is mostly wrong at the WPI non-food, non-fuel level – the real indicator is in the market secondaries and services (which comes in the CPI). Rate cuts will exacerbate the issue.

        • DJ says:

          Yeah, wage inflation is tied to CPI as well, so Bhalla might well be wrong. Anywho, I don’t think Rajan will be starting a rate cut cycle. But, a one-off normalization, by removing the recent measures would also serve as an effective rate cut. I find it hard to believe that the 11-12% is necessary at the short end. On the mid and long-end, I guess rates should go up due to credit risk, rate rise in the US and upcoming gilt supply.

      • DJ says:

        Not to forget the good monsoons this year.

  • Kaushik says:

    God, Semi God and Super God..we have made Rajan all of this in last few weeks… But all gods still need poor disciples right?

  • Leo says:

    the problem with bhalla kinda guys they are clueless… if u cut rates what if inflation goes to 20%
    what then ? will suddenly say ohoh shucks we are screwd and raise rates 20% ?
    u cant cut rates when inflation is rising …currency is under attack you have make it clear rates have to rise .IF RR does a volcker it will be the best thing india can get .Stock market bulls will suffer but it will save the country from currency blow up.