After having some great volatility in INR against dollar in past few months where Rupee saw levels of more than 76.50 in recent days, people are claiming that its all due to constant selling in stock market. FIIs are withdrawing money from stocks and all other stuff. But is it really due to stock market outflow or something else. Lets first emphasise on Indian Government debt position as on 17.12.2021 along with yearly outflow of Interest.
Point to be noted
As on 30.06.2021 External Borrowing is $571.30 Billion or Rs 42,84,750 Crore Depreciation of 5% in Rs against dollar costed us increase in 2.14 Lakh crore Debt.
Further lets analyse what is the portion of amount required to be repayable in one year:
Point to be noted
Short Term Debt Maturity of External debt denominated in foreign currency is $102.50 Billion as on 30.06.2021 as per RBI press release. Till date dollar already depreciated by more than 5% so the cost of debt has increased further by $5.12 Billion i.e 40,000 crore.
Conclusion
From October to December mid FIIs took out Rs 90000 crore from Stock market but they have also hedged themselves with various derivative products like currency derivatives. The data of outflow is incomplete with taking into consideration of Bond market.
Each years Indian goverment is required to pay Rs 10-15 lakh crore for repayment of principal and Rs 6.02 lakh crore as interest.
So the biggest cause of outflow is Inflation anticipation for emerging markets like India wherein the rate of interest or yeilds spike can force FIIs to spike the outflow to double pace.
- By Nishant Maheshwari and Vishal Vora
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