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Charts & Analysis

October Ends With FIIs Selling The Second Largest Amount of Debt Ever, Buying Loads of Equity

Foreign Investors continue to sell debt in September, as they buy a truckload of equity. As stock markets hit new highs on their purchases, what seems to have been lost in the melee is that they are getting the heck out of their debt positions. FIIs bought 15,700 cr. worth of equities in October, but sold 13,578 cr. worth debt.

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This is the second biggest debt sales in a month, in over six years.

It’s obvious why debt is not attractive. RBI is increasing the repo rate while reducing the MSF rate. Longer term bonds will only lose value as long term yields go up, and with shorter term rates falling (from the 11% to the 8.75% levels) the lure of debt is at a low.

Here’s a longer term picture:

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Will November see more FII purchases in stocks, and debt selling?

With QE continuing in the US, there is definitely enough money to continue buying stocks. There are headwinds – like a slowing economy, lower manufacturing activity and high inflation. But these are longer term in nature, and before things come crashing down, they can go way way up.