REITs become almost leveraged net buyers after six months

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Mumbai: Foreign portfolio investors (REITs) have become net buyers of debt so far in August, almost after six months, due to cooling oil prices, easing inflationary pressures, manageable deficits and recoveries dynamic taxes.

According to custodian data, foreign investors have so far bought debt worth Rs 1,673.63 crore in August, compared to net sellers of debt worth Rs 2,056.33 crore on last month.

“This happened due to the general state of the market – signs of slowing inflation, oil outlook remaining weak due to slowing global demand and slowing China, manageable deficits for dynamic tax collections,” said Kunal Sodhani, Vice President, Global Trading Center, Shinhan Bank.

For this reason, the yield on the benchmark bond also fell by almost 30 to 40 basis points. The benchmark 10-year bond yield of 6.54% at 2032 closed at 7.2639% on Friday.

India’s retail inflation declined further in July to 6.71% due to lower food prices and lower Brent prices in the international market.

Even after that, inflation remained above the Reserve Bank of India’s (RBI) 6% upper tolerance band for the seventh consecutive month.

Retail price inflation was 7.01% in June.

Meanwhile, to tame inflation, the RBI raised the repo rate by 50 basis points to 5.40% at the last policy meeting. With this, the central bank has increased the repo rate by 140 basis points since May 2022 to control inflation.

Going forward, entries are expected to continue, experts said.

“MPC could persist with increases until real rates are in positive territory in the medium term, which could happen very soon. Bonds could rally a bit more before they bottom out,” Sodhani said.

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