FPI sold Rs 45,536 crore in September as analysts seek stable rupee and yields
GS3Economy · S&T · Environment · Security· Capital markets & SEBI· Prelims·
Capital account stability and currency risk: a key GS3 topic regarding global macroeconomic influences.
Why in news
Foreign Portfolio Investors (FPIs) sold Rs 45,536 crore in September as analysts cited high US 10-year Treasury yields and crude prices as deterrents to investment.
Background
FPIs sold a total of Rs 45,536 crore in equity in September. Analysts identified the US 10-year Treasury yield (which reached 5.34%) and high crude prices as primary drivers of the sell-off.
Facts for Prelims
- FactFPI equity selling in September reached Rs 45,536 crore.
- FactUS 10-year Treasury yield reached 5.34% in the week preceding the report.
- FactEconomists polled by Reuters expected a 25-basis-point rate hike to 5.50% at the October 5-7 RBI meeting.
Prelims practice question
What was the level of the US 10-year Treasury yield reached in late September as cited by analysts?
- (a)6.25%
- (b)4.50%
- (c)3.10%
- (d)5.34%
Show answer
Answer: (d) 5.34% — The note states the US 10-year Treasury yield reached 5.34% in late September.
For Mains
Q. Analyze the impact of global interest rate fluctuations and commodity price volatility on India's capital account and currency stability.
Dimensions to cover in your answer
- External vulnerability: High import reliance on crude oil exacerbates current account pressure and inflation.
- Yield competition: High US Treasury yields divert capital from emerging markets to safer dollar assets.
- Currency risk: Rupee depreciation offsets equity gains, deterring long-term foreign portfolio investment.
Keywords: Foreign Portfolio Investment · Capital Account · Current Account · Yield Differential · Currency Volatility · Macroeconomic Stability
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