BUSINESS
FII exodus impact seen low.
The 17-session sell-off seen in the bond markets due to unwinding by foreign institutional investors (FIIs) may be getting over, and this may provide a bolster to the rupee — that is the refrain on the Street.
FIIs have net sold bonds worth $4.1 billion in the last 17 sessions, in line with the trend in other emerging markets.
Talk of tapering in quantitative easing (QE) by the US Federal Reserve led to a rise in US treasury yields and debt outflows which weakened emerging market currencies, especially those with high current account deficit like India.
Neelkanth Mishra and Ravi Shankar, analysts with Credit Suisse, see the sell-off ending and believe its impact on the Indian economy is relatively low.
That’s because of India’s (relatively) closed debt markets. “Less than 5% of its bonds are foreign-owned, much lower than other emerging markets. This limits the impact on the broader economy: India’s yields have risen the least since the sell-off started. Also, with a lot of bond market selling behind us, unless a crisis emerges somewhere, a further exodus of capital is unlikely, except in the very near term,” they said in a note on Friday.
Although Mishra and Shankar presage further fall in emerging market bond prices, they do not expect major damage because the Fed is unlikely to stop buying bonds before the end of 2014.
Jahangir Aziz and Sajid Chinoy, economists at JP Morgan, say there could be a risk to the Indian economy if the recent FII outflows from equities extend because, contrary to other emerging markets, equity inflows dominate debt inflows in India due to regulatory restrictions.
“As such, the outstanding stock of FII holdings of domestic debt has grown materially and is now at around $35 billion. Consequently, changes in debt flows, especially if they occur over a short period of time, begins to matter. While this may not have raised too much concern before, with equity inflows slowing down and trade deficit still large, the debt outflow became a material factor in driving down the rupee,” Aziz and Chinoy wrote on Friday.
Mishra and Shankar, however, do not see current situation warranting major equity outflows.
“India would still be badly impacted if capital flows to emerging markets slow down structurally — mainly through the currency, given the precarious balance of payments situation. But past episodes of FII equity investors’ net selling coincided with global crises.
While the moves in currencies and bond yields may be reminiscent of such trends, there isn’t yet any impending problem of a bank blowing up, a currency union dissolving, or an emerging market declaring bankruptcy,” they said.
Rohini Malkani, economist and managing director at Citigroup Global Markets, is more or less on the same page.
“The impact on India could be muted by a further drop in commodity prices which, in turn, could lead to lower current account deficit and also because of continued expansionary monetary policy by the Bank of Japan and the European Central Bank,” she recently said.
Rajesh Cheruvu, chief investment officer at RBS Private Banking, believes the bond sell-off may persist till there’s some assurance from the Fed.
“We don’t see the Fed withdrawing the QE programme soon as the US unemployment rate is over 7.5%, higher than what the Fed would like to see. Also, they would like to see sustained recovery before taking that call,” said Rajesh.
Who is IAS K Gopalakrishnan, suspended for violation of discipline amid WhatsApp group controversy?
Amid linkup rumours with Abhishek Bachchan, Nimrat Kaur shares cryptic note: 'Our journey is...'
Champions Trophy: PCB to seek clarity from ICC after BCCI refuses to send Indian team to Pakistan
JEE Main 2025 preparation: IIT Kanpur launches FREE 45-day online course; check details
KL Rahul breaks silence on LSG exit in IPL, says, ‘I wanted to go…’
Khushi Kapoor wears bracelet with rumoured boyfriend Vedang Raina's name, see viral photo
Meet man who leads Rs 243890 crore company, lost Rs 21735 crore in one day after...
IND vs SA: Varun Chakravarthy takes 5-wicket-haul but enters THIS unwanted record in 2nd T20I
Sustainability Takes Center Stage in US Manufacturing with Leader Viralsinh Solanki at the Forefront
How to Crack the CTET Exam in 1st Attempt?
'Trump visits India': Man perfectly mimics Donald Trump's 'love' for India, watch viral video
Manipur: 11 suspected militants killed in gunfight with security forces in Jiribam
Ram Gopal Varma booked for offensive posts against Andhra Pradesh Chief Minister Chandrababu Naidu
Will MrBeast make a video with Virat Kohli? World's biggest YouTuber drops massive hint
This cricketer once walked out to bat with an aluminium bat against England, refused to...
Bigg Boss 18: Rajat Dalal shuts down Vivian Dsena, says 'tera naukar thodi hoon'
Meet actor who cheated on wife with multiple women, got divorced, remarried same woman but...
Aryan to Anaya: Ex-Indian cricketer, coach's son undergoes sex change surgery
Shillong Teer Result OUT for November 11, 2024: First and second round Monday lottery results here
How US Vice President-elect JD Vance found love in Indian-origin Usha Chilukuri, know their story
Maruti Suzuki launches new Dzire: Check price, features of Tata Tiago, Honda Amaze rival
Sebi’s Rs 25 crore penalty plea against Mukesh Ambani dismissed by SC in THIS case
Big blow to former JD(S) MP Prajwal Revanna as SC denies bail in rape case
6,6,6,6,6,4,4,4,4,4: Shubman Gill's MASSIVE 268 runs in Ranji against...
Berjis Desai’s crime thriller “Murder at the Racecourse” keeps you on the edge
'We went totally wrong...': Rohit Shetty opens up on casting Arjun Kapoor in Singham Again
Shah Rukh Khan's Marjaani gets BTS makeover, watch Jungkook, V, Suga's viral dance
'India's finest': Netizens pour in emotional tributes as Vistara readies for last flight today
Vistara to make last flight today before Air India merger, all you need to know
Zomato CEO Deepinder Goyal offers job to X user who suggested THIS BIG change
What is Mukesh Ambani, Nita Ambani's son Anant Ambani's annual salary? Know all about his net worth
Veteran actor Delhi Ganesh cremated with Air Force honours, here's why
'We got the...': Germany grooves to Marathi song Taambdi Chamdi, netizens go berserk; WATCH
Kamal Hassan asks fans to not call him 'Ulaganayagan', says 'this decision comes from....'
'I fell and it went...': Vijay Deverakonda REACTS after video of him falling down stairs goes viral
BIG update on Rohit Sharma's participation in 1st Test against Australia, he is all set to…
Justice Sanjiv Khanna takes oath as 51st Chief Justice of India
Ajay Devgn spills the beans on his 14-year-old son Yug's love life, says 'he is not afraid....'
11/11: Why November 11 is a good day for manifestation? Know how, when you can manifest today
Onion prices rise to Rs 80 per kg: Check rates in Delhi-NCR, Mumbai, Chennai
Guru Purab Bank Holiday November 15: Are banks open or closed on Guru Nanak Jayanti?
Meet Indian genius, world's youngest female Chartered Accountant who secured AIR 1, she is from...
Delhi continues to choke amid rising air pollution, AQI breaches 350...
Avatar 3: New posters of James Cameron's film feature fire tribe, stunning visuals go viral
This country lets male tourists marry women for a few days due to....
Maharashtra polls: Congress suspends seven more rebel candidates
Meet man who quit high-paying job in US, then built Rs 150 crore company in India, his business is…
Viral video: Little girl wins heart with adorable dance to 'aayi nai' song, watch
Queen Elizabeth's 1947 wedding cake slice sold in auction at this SHOCKING price
Viral video: Woman's sizzling dance to 'tere liye' leaves internet drooling, watch
Meet man who leads Rs 185985 crore company as CEO, son of Indian billionaire, he is...
'We don't encourage...': Zomato CEO Deepinder Goyal launches new feature 'Food Rescue' to reduce...