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Charts & Analysis

FIIs Continue To Sell Debt, Slow Down Equity Buys

Foreign Institutional Investors are continuing to sell debt like it’s going out of fashion. And it probably is. In September, on the back of more than 13,000 cr. net investment in equity markets and a favourable environment for the rupee by RBI action, we saw the rupee recover nearly 10%. Yet, debt markets continued to see an outflow, of 5,678 crores.

October, in the first few days, has seen a large exit from debt markets, though they have been slightly positive on equities.

Net monthly FII Investment

In the more longer term:

Net Monthly FII Investment

In the last month, we’ve seen FIIs first increase and then lower their equity exposure. Debt however is what they continue to sell, regardless.

 

FII trades since Sep 1 2013

With the US shutdown, it was likely that money came to India while investors waited to see what would happen. The debt ceiling talks are due to be resolved by Oct 17. However, in the US, things only happen at the last minute, so I expect confusion to continue in that department for the next two weeks.

The larger implications in the coming weeks will be from corporate results and macroeconomic cues. I expect the rupee to fall again after November 30 when the RBI measures stop, and before that, FIIs will take this opportunity to get out of less liquid investments.