To begin with, the selling has not been too heavy. In July 2020, FPIs sold Indian bonds to the tune of Rs.2500 crore, which is slightly larger than the equity inflows. While yields are higher on Indian bonds, Indian ratings being just one notch above default is not making investors comfortable. In addition, the risk-off money is moving to debt in more stable markets.

This is best evident in the levels of limit utilization of debt by FPIs. In the G-Sec category, only 41% of the available limits are utilized. In the state loan SDL category, utilization is just 1% as FPIs are not keen on state paper. The utilization in corporate debt is 36%. This is in the general category with the utilization of long term category relatively much lower.