Foreign investors pull out $1.2 billion from debt market in two weeks

Overseas investors have pulled out more than Rs 7,800 crore ($1.2 billion) from the Indian debt market so far this month amid concerns about the US government shutdown.

Foreign institutional investors (FIIs) were gross buyers of debt securities worth Rs 5,541 crore during October 1-11, while they sold Rs 13,365 crore of bonds, resulting in a net outflow of Rs 7,824 crore.

In September, FIIs had pulled out a net Rs 5,600 crore of debt securities, according to data available with market regulator, the Securities and Exchange Board of India. Market experts attributed the sell-off to global cues, including the US shutdown.

In the equity market, foreign investors pumped in a net Rs 3,230 crore so far this month.

India's current account deficit in Q1 widened to $21.8 billion, or 4.9 per cent of GDP, from $16.9 billion, or 4 per cent of GDP, a year earlier, the Reserve Bank of India said on September 30.

Excluding the increase in gold imports of $7.3 billion in Q1 over the corresponding quarter of the preceding year, the CAD would have been $14.5 billion, or 3.2 per cent of GDP, the RBI said.

The benchmark S&P BSE Sensex has gained 1,149 points since September 30 and closed at 20,528.59 on Friday.

FIIs had been aggressive buyers of bonds since the beginning of 2013 on account of higher yields offered by government and corporate debt. The debt market attracted a net inflow of about Rs 25,000 crore in January-May.

So far this year, foreign investors have pulled out a net Rs 44,400 crore ($6.9 billion) from the debt market.

As of October 11, the number of registered FIIs in the country stood at 1,748 and the total number of sub-accounts at 6,353.