Mumbai: The sudden spike in US bond yields post presidential election results and depreciation of the Indian rupee against the US dollar have triggered ‘unwinding of dollar carry trade’ that has resulted in foreign portfolio investors offloading domestic equities worth Rs 10,000 crores in just seven trading sessions.
As per the data available, the impact on the bond market was the most with overseas investors pulling out Rs 12,100 crore from the Indian debt market in a span of just four trading sessions.
“With the 10-year bond yields in the US rising to 2.25–2.30 per cent from 1.6 per cent, the advantage of interest rate arbitrage enjoyed by investors borrowing money from US and investing in emerging market equities and debt has come down.
“Additionally, the sharp depreciation in currency have impacted their dollar adjusted returns negatively forcing them to unwind their dollar carry trade,” said Rikesh Parikh, vice president, equities at Motilal Oswal Financial Services.
