Indian funds sell $1.6 bn of bonds

Indian mutual funds sold a net Rs 7,720 crore ($1.6 billion) of debt this month, the most this year, to meet redemptions from investors worried by the impact of the global credit crisis and a slowing domestic economy.

Funds pulled out Rs 3,210 crore from bonds on October 14, the highest this month, the Securities & Exchange Board of India (Sebi) said on its web site on Wednesday. Mutual funds had placed a net Rs 64,620 crore in bonds in the January-September period.

Money managers worldwide are grappling with withdrawals after the worst financial crisis since the 1930s rocked stock markets. Foreign funds, who bought a record $17.2 billion of equities last year, have pulled out $11 billion since January, triggering a 46 per cent slide in the benchmark stock index and driving the rupee to a near-record low.

“Corporates and other investors have started pulling out cash from mutual funds as other sources are drying up,’’ said Dhirendra Kumar, managing director at ValueResearch, a mutual fund-tracking firm in New Delhi. Assets managed by debt funds have “fallen sharply’’ because of redemptions.

Companies and bank treasuries have pulled out a record Rs 30,000 crore from money market funds in the past 15 days, a newspaper reported. Fund managers were forced to sell some assets below cost price due to heavy withdrawals, the paper said.

The Reserve Bank of India said it would supply as much as Rs 16,500 crore through an additional money auction to help banks meet the needs of cash-strapped MFs. The move is in line with actions taken around the world to provide enough cash to the banking system and instill investor confidence.