India's index-linked bonds see record foreign selling in May on profit-booking, currency swings
Foreign investors sold Indian government bonds included in global indexes for a second straight month in May, driven by profit-taking and currency volatility rather than a change in sentiment towards the country, several investors said.
ADVERTISEMENT Foreign investors offloaded 123.2 billion rupees ($1.44 billion) of Indian bonds under the Fully Accessible Route in May, the highest since its 2020 launch, after selling 111.4 billion rupees in April.
They have invested 1.20 trillion rupees in Indian bonds till March since June 2024, when Indian bonds were included in the JPMorgan emerging debt market index.
"The recent outflows are best viewed through the lens of profit-taking after a strong run, rather than a shift in fundamental conviction," said Rong Ren Goh, portfolio manager at Eastspring Investments, which manages $256 billion of assets. Some headwinds, including geopolitical tensions and uncertainty over the new RBI governor's stance on FX policy, may have also led investors to trim exposure and rebalance portfolios, he added.
The Indian rupee has grown more volatile over the past six months since new RBI Governor Sanjay Malhotra took charge in December, with implied volatility averaging 4.26%, up from 2.24% during the final six months of former governor Shaktikanta Das's tenure.
ADVERTISEMENT
A rise in U.S. Treasury yields due to fear of a wide budget gap and inflationary impact of President Donald Trump's tariff policies and a drop in Indian rate due to declining inflation have also narrowed the yield differential between the two markets.
The spread between Indian and U.S. bond yields have collapsed to 21-year low of around 170 bps now, from 250 bps early November.
ADVERTISEMENT "This (selling in Indian bonds) was not driven by skepticism towards India, but rather by shifts in global macro sentiment," Jean-Charles Sambor, head of emerging markets debt at TT International Asset Management said, that manages $3.15 billion of assets across EM. "We do not see this (outflows) as a game changer. Sentiment towards Indian bonds is likely to improve as inflation continues to decline and there is more fiscal space," Sambor said, adding he remains constructive on rupee bonds and believes appetite for local currency bonds is returning. ($1 = 85.3790 Indian rupees)
ADVERTISEMENT
(You can now subscribe to our ETMarkets WhatsApp channel)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
India Today
23 minutes ago
- India Today
Sebi issues attachment order against Mehul Choksi for non-payment of penalties
The Securities and Exchange Board of India (Sebi) on Friday issued a recovery attachment order against absconding diamond merchant Mehul Choksi, who is a co-accused in the Rs 13,850-crore Punjab National Bank (PNB) fraud case, which is one of the biggest banking scams in India's recovery officer has been assigned the task of taking action on the attachment order, issued on June 4 by the financial agency's Mumbai action against the fugitive diamond merchant had been initiated due to the non-payment of a Rs 1.5 crore penalty imposed by Sebi on January 31, 2022. Sebi went ahead with the attachment as it believed that Choksi might dispose of funds, thus obstructing the recovery of the total dues amounting to Rs 2.10 who has been wanted in India since 2018, was arrested in Belgium in April. His arrest, which took place on April 12, was made by Belgian authorities after a request from Indian agencies like the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED).He was detained in a hospital in Belgium, where he was said to be receiving medical PNB SCAMThe Rs 13,850-crore PNB scam involved Choksi and his nephew Nirav Modi, who is currently languishing in a jail in the UK and is soon to be extradited to they were able to take loans from foreign banks using Letters of Undertaking (LoUs) issued by PNB's Brady House branch in Mumbai. An LoU is a bank guarantee which allows customers to get short-term credit from overseas 2011 to 2018, Choksi, Modi and their companies used these LoUs without following the normal procedures. Some bank officials were involved and allowed the LoUs to be issued without entering them into the bank's main system. This helped the fraud go unnoticed for funds, which were shown as being used for importing goods, were mostly never returned. Instead, new LoUs were taken to repay the earlier ones, and the money was used for business and personal total value of the fraud reached around Rs 13,850 crore. Out of this, Nirav Modi's companies were linked to Rs 6,498 crore and Choksi's Gitanjali Group to Rs 6,097 crore. The remaining amount includes interest and other Watch IN THIS STORY#Mumbai Indians
Mint
24 minutes ago
- Mint
Sebi retracts words ‘board note' from IndusInd Bank order, says it was ‘engagement note'
Mumbai: Markets regulator Securities and Exchange Board of India (Sebi) on Friday issued a corrigendum to its 28 May order in the alleged insider trading case involving IndusInd Bank, clarifying that the words 'board note' should be read as an 'engagement note signed by the chief financial officer and noticee numbers one and two.' 'Noticee numbers one and two' are former deputy chief executive Arun Khurana and former chief executive officer (CEO) Sumant Kathpalia. On 28 May, Sebi cracked the whip on former top executives of the bank for alleged insider trading. It barred former managing director and CEO Kathpalia, along with four other senior executives from the market and impounded gains of ₹19.78 crore, alleging they sold shares while in possession of unpublished price-sensitive information (UPSI). A week before the order, IndusInd Bank chairman Sunil Mehta said the board was not informed of the derivatives discrepancies and that it took swift measures when it came to know. However, Sebi had said in its 28 May order that the bank had hired KPMG as early as on 29 January 2024 through a 'board note', to review the discrepancies revealed by an internal team, implying that the board was aware before the issue came to light on 10 March. On Friday, Sebi replaced the words board note with the term engagement note, thus distancing the board from the decision to hire KPMG in 2024. What RBI said Meanwhile, the Reserve Bank of India (RBI) on Friday said IndusInd Bank has taken sufficient steps to improve its accounting practices, with governor Sanjay Malhotra noting that the bank is doing well overall. The remarks signalled regulatory comfort with the lender's actions so far, and pushed its shares up over 5%. The RBI's comments come nearly three months after IndusInd Bank disclosed issues in its derivatives book, which triggered a 27% crash in its shares. Since then, the bank has seen the exit of top executives and faced scrutiny from both the central bank and Sebi. 'The MD and CEO has resigned and it says for taking moral responsibility. So, I thought that should be good enough,' Malhotra said at the post-policy conference.
Time of India
31 minutes ago
- Time of India
One in four international students in US were from India: At 4.2 lakh Indian students, fuelled surge in numbers during 2024
The total number of active F-1 and M-1 international student SEVIS records in the US were a whopping 15.8 lakh in 2024, marking a 5.3% increase over the previous calendar year. According to a report released by the US Immigration and Customs Enforcement (ICE) – 'SEVIS by the Numbers 2024', while international students hailed from more than 229 countries, this growth was substantially fuelled by students from India. Asia had the largest number of active international student records in the US, nearly 11 lakh students from this continent accounted for nearly 72% of the total foreign student population. Nearly 4.2 lakh Indian students represented an increase of 11.8% compared to 2023, while the 3.2 lakh foreign student records from China, which is the other major source country, represented a small decrease of 0.25 percent compared to 2023. Indian students constitute nearly 27% of the total foreign student population in 2024, followed by Chinese at 20%. The data in this report is drawn from the Student and Exchange Visitor Information System (SEVIS), a web-based system that the Department of Homeland Security uses to maintain and manage information on foreign students and exchange visitors. While the F-1 visa is held by those undergoing academic study courses, the M-1 visa is given to students undergoing vocational programs. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Giao dịch CFD với công nghệ và tốc độ tốt hơn IC Markets Tìm hiểu thêm Undo According to the ICE-report, more than 90% or to be precise 14.3 lakh international students were enrolled in higher education degree programs, California enrolled the largest number of foreign students at 2.37 lakh, followed by New York at 1.72 lakh. attracted the maximum number of international students While this ICE-report is based on data for 2024, the recent trends are not as rosy. Chris R. Glass, a professor and higher education specialist at Boston College analysed SEVIS data between March 2024 to March 2025. According to him, 'The overall decline of -11.3% from March 2024 (with 11.53 lakh active students) to March 2025 (with 10.22 lakh active students) is remarkable in both scale and speed.' His study shows that the number of students from India declined by nearly 28% from 3.54 lakh in March 2024 to 2.55 lakh a year later. The number of Chinese students rose marginally by 3.28% to stand at 2.63 lakh as of March 2025. Glass points out that 'The current year-over-year decline is a reflection of an enrollment cycle that began under the Biden administration, so the March 2025 numbers have yet to reflect any impacts of policies implemented under the second Trump administration.' Anecdotal evidence suggests that US is losing its lustre as an attractive study destination for Indian students owing to a multitude of factors such as: The arbitrary termination of SEVIS records and/or F1 visas of international students – which led many to self deport, while others stayed back to battle it out in courts; the uncertainty relating to continuity of the extended optional practical training program (OPT) for STEM students, the temporary suspension of consulate interviews pending release of a social-media scrutiny policy and mass layoffs in corporate America. Thus, the numbers for March 2026 could be much lower. Indian students dominate the STEM field: While international students are eligible for a one year OPT, those from the Science, Technology, Mathematics and Engineering (STEM) fields, post their graduation, get an additional two years of work experience under the OPT program. There were 1.94 lakh OPT students with both an employment authorization document (EAD) and who reported working for an employer in 2024, compared to 1.60 lakh 2023. This marks a 21.1 percent increase from 2023 and the fourth year of consecutive growth, states the ICE-Report. In 2024, nearly 1.65 lakh international students participated in the STEM-OPT extension program. The ICE-report points out that Indian students are particularly prominent in the post-completion OPT- STEM extension program, accounting for a substantial 48.0% of participants. and 20.4% from China.
