Foreign investors pull Rs 5,109 crore from govt bonds in 3 days amid global uncertainty

Foreign portfolio investors withdrew nearly Rs 5,109 crore from Indian government securities under the fully accessible route in three days. Rising crude prices near USD 110, US Treasury yields above 5 per cent and a weaker rupee made Indian sovereign debt less attractive amid global uncertainty

Mumbai: Foreign portfolio investors (FPI) pulled nearly Rs 5,109.21 crore in the last three days from government securities under the fully accessible route amid dampened sentiments due to global uncertainty.

Under the fully accessible route (FAR), eligible overseas investors are allowed to buy and sell certain government securities without any cap.

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According to the Clearing Corporation of India (CCIL), FPI investment in government securities under FAR stood at Rs 366,806.286 crore as on September 15, as compared to Rs 371,915.496 crore as on September 9.

The investment stood at Rs 371,520.751 crore as on September 10 and Rs 366,791.286 crore as on September 11, data showed.

“We saw notable selling by FPIs in G-Secs under the FAR route. Elevated crude prices, hovering around USD 110 amid the worsening US-Iran war situation, coupled with US Treasury yields nearing the 5 per cent mark and persistent pressure on the rupee, have made Indian sovereign debt relatively less attractive to foreign portfolio investors,” said Mataprasad Pandey, vice president at Choice Wealth.

Brent crude oil prices in the international market have increased as concerns over global supplies intensified after attacks disrupted Saudi Arabia’s East-West pipeline and planned talks between Gulf Arab states and Iran were postponed.

Currently, Brent crude oil prices stood at USD 107.41 per barrel.

Further, the yield on the benchmark 10-year US Treasury note crossed 5 per cent on Monday for the first time since 2023, as a sharp rise in oil prices intensified selling in government bonds globally.

The breach of the key yield level comes amid a widespread bond market sell-off, fuelled by concerns over persistent inflation and rising government and corporate debt. Higher borrowing costs have also pushed debt servicing expenses in the UK, Germany and other economies to multi-year highs.

Typically, rising interest rates in advanced economies make their financial assets more attractive to global investors, prompting them to withdraw investments from emerging markets. This can trigger capital outflows from emerging-market debt, increase borrowing costs and put pressure on their currencies.

The outflows were also triggered by a depreciating rupee. The local currency depreciated 42 paise to close at 95.96 against the US dollar on Tuesday amid elevated Brent crude oil prices and heightened Middle East tensions.