Topic 2: DEBT MARKETS: BALANCING ACT

October 2024 was a challenging month for the Indian debt market, characterized by significant FIIs outflows driven by geopolitical tensions and concerns over domestic monetary policy. While DIIs continued to support the market with substantial investments. For the first time since the inclusion of Indian government bonds in the JP Morgan bond indices, FIIs recorded a net outflow of ₹4,697 crore from the Indian debt market in October. This marked a reversal from previous months where there had been inflows. In September, for example, FIIs had net bought ₹1,278 crore worth of debt. The outflows were primarily driven by geopolitical tensions, particularly related to conflicts in West Asia, and rising crude oil prices. The sentiment in the debt market was also influenced by concerns over potential U.S. interest rate hikes and domestic economic indicators. The yield on the benchmark 10-year government bond fluctuated, settling around 6.78% towards the end of October. This yield was influenced by both domestic economic conditions and global cues, including U.S. Treasury yields. Domestic institutional investors (DIIs) remained active in the market, with significant investments continuing to flow into government securities. Debt investors navigated a complex landscape influenced by both domestic and global factors. The outlook for November will depend on evolving geopolitical conditions and responses from central banks across the globe regarding interest rates.



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