RBI eliminates largest bond gain, US$8 billion fund outflow extends

By IVCPOST Staff Reporter

Jul 17, 2013 06:33 AM EDT

India's decision to increase borrowing price just two months following the cut eliminated the largest bond gains. This fuelled bets extension in the already US$8 billion worth of fund outflows.

Yesterday, the revenue from the 10-year sovereign notes rose 52 basis points to 8.07%. This was 2013's highest level. The yield was gained after the Reserve Bank of India increased two of its interest rates. RBI raised the rate by 2 percentage points each last July 15. However, it kept its repurchase rate the same.

The global funds cut holdings of rupee debt by US$8.4 billion. This was from a record US$38.5 billion in May, according to the data from JPMorgan Chase & Co.

"The confidence of investors has been dwindling because of global market conditions and India's weakening domestic situation," Aletti Gestielle Sgr SpA's fund manager in Milan, Walter Rossini, said when he was interviewed yesterday. "Monetary policy in India won't ease in the coming months and therefore foreign-fund outflows may intensify. The outflows are despite the efforts of policy makers, which means the undertone is weak and any further measures may have an insignificant impact."

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