Mumbai: Indian mutual funds sold debt worth Rs22,271 crore in the first three weeks of October because investors are reluctant to infuse fresh money to replenish outflows caused by a surge of redemptions in a volatile market.
Analysts say the measures taken by the Reserve Bank of India (RBI) to ease a cash and credit crunch will take time to soothe the Rs5.29 trillion mutual fund industry, but inflows should return soon with the overnight inter-bank money market rate declining to around 6.5% from around 20% at the peak.
Higher call rates encourage investors in debt funds, particularly banks, to withdraw money from mutual funds and lend in the overnight call money market to earn more.
RBI has cut its policy rate by 100 basis points and banks’ cash reserve ratio (CRR), or the proportion of deposits that banks need to keep with the central bank, by 250 basis points to release Rs1 trillion into the banking system. One basis point is one-hundredth of a percentage point. Besides, it also created a Rs20,000 crore liquidity window for mutual funds.
So far, mutual funds have drawn only Rs8,800 crore from this window. On Friday, there was no taker.
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Thursday, November 06, 2008
Funds sell record Rs22,271 crore of debt in Oct
Norway fund to put $2 bn in India
New Delhi: In a move that will bring considerable relief to Indian equity markets roiled by the global credit crisis, the Norwegian sovereign wealth fund (SWF), plans to invest around $2 billion (about Rs9,772 crore) in India, primarily in equities, over the next two months because it has increased India’s weightage in its investment portfolio.
According to Thorvald Moe, deputy secretary general in the Norwegian finance ministry, India’s weightage was enhanced recently to 0.94% from the earlier 0.2%. The enhanced weightage will see an inflow into India of around $2 billion, which needs to be invested by the end of this year, Moe said.
This money will come into the country at a time when foreign institutional investors (FIIs), the main driver of Indian stock markets, have taken out close to $11.2 billion from the country since January.
In this period, Sensex, the benchmark index of the Bombay Stock Exchange has fallen by almost 50% to 10,683.39, the level it closed at on Tuesday.
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