|Chennai||Rs. 24020.00 (-0.17%)|
|Mumbai||Rs. 25020.00 (0.28%)|
|Delhi||Rs. 24450.00 (0%)|
|Kolkata||Rs. 24600.00 (-0.32%)|
|Kerala||Rs. 24050.00 (0%)|
|Bangalore||Rs. 24160.00 (-0.17%)|
|Hyderabad||Rs. 24030.00 (-0.12%)|
The heavy duty sell-off in Indian bonds by foreign institutional investors (FIIs) has not only hurt the currency but also put India's ability to fund its current account deficit at risk. There are many suggestions by economists to deepen India's bond markets, which would improve the flow of foreign capital. FIIs love Indian equities, which is why they own nearly 22 per cent of the listed universe.
It is this elevated levels of foreign ownership that has prevented a major sell-off in equities so far, believe many experts. Despite slowing growth and weak corporate earnings, foreign investors have not sold equities in a big way. FIIs do not have as much emotion for Indian bonds. FIIs own only 1.6 per cent of government securities or sovereign bonds, primarily because the government has a cap on aggregate foreign investments in Indian gilts. Foreign ownership in Indian bonds is low because of the aggregate $30-billion cap. The positive of such a cap would be that low ownership levels would help prevent a sovereign debt crisis, even if a large sell-off would happen. However, the downside of shallow bond market implies poor foreign inflows into bonds and a shallow bond market. Indian bond markets are shallow also because Indian gilts are not part of any emerging market bond index, a structural issue.