French 10-Year Yield Hits Highest Since 2002 as Protests Continue; Foreign Investors Sell Indian Stocks for 10th Straight Week

France is trying to cut a 5.4% budget deficit while hundreds of thousands of people are in the streets. Bond markets have noticed.

The yield on France's benchmark 10-year government bond, the OAT, rose 11 basis points on Thursday, Oct. 22, to its highest level since 2002. The spread over German 10-year Bunds, the euro zone's benchmark, widened to its largest since November 2011.

France: protests, police and a budget fight

Protests are planned across France today, Oct. 24. Interior Minister Laurent Nuñez said up to 70,000 officers will be deployed nationwide, backed by helicopters, armored vehicles and water cannons.

More than half a million people marched last week. About 3,000 shops across France were damaged or looted. In Limoges, a suspected arson nearly destroyed the 19th-century city hall.

The unrest began last month, when high school students southeast of Paris protested over school conditions. It spread as people demanded relief from rising living costs.

The Louvre, the Orsay, the Picasso Museum and the Grand Palais are closed today. Art Basel opened Friday for a single day, and organizers cancelled the weekend program. Shopkeepers near Place de la République have boarded up storefronts, including a bank branch.

Marches are scheduled in Paris and Marseille. Local authorities banned rallies in Lyon, Nice and Montpellier. About 50 organizations, including unions, left-wing parties and student groups, have also called a protest on the sidelines of the two-day congress of Marine Le Pen's party. The presidential election is next spring.

A union-backed national day of strikes and protests is set for Nov. 5.

The fiscal problem underneath

The government wants the deficit at 5% of GDP in 2027, down from a projected 5.4% in 2026. The National Assembly is due to resume debate on the budget's tax measures on Oct. 27. Opposition lawmakers are resisting the plans.

Moody's on Friday, Oct. 23, kept France at Aa3, which it calls "high grade," with a negative outlook. The agency said the outlook "reflects the increased risk that the fragmentation of France's political landscape will continue to impair the functioning of the country's legislative institutions." Moody's said it could return the outlook to stable if institutions manage to narrow the deficit.

Analysts are split on what comes next. Matthew Ryan, head of market strategy at Ebury, said it "remains unclear whether the 2027 budget will clear parliament." Even if it does, he said, it looks set to be "so riddled with concessions to both the left and the right that the deficit problem is left insufficiently addressed."

Charlotte de Montpellier, senior economist at ING, said the unrest "adds another layer of uncertainty" and "reinforces the perception that any future government will find it difficult to deliver the reforms and savings required."

Alain Durré of Natixis CIB said the government is determined to prevent a sharp rise in borrowing costs. He said it could invoke Article 49.3, which pushes a bill through the Assembly without a final vote unless a no-confidence motion passes, or use executive ordinances. Durré also said recent pressure on French debt has come mainly from tactical portfolio reallocations, with traditional buy-and-hold investors "still sitting on the sidelines."

India: a tenth week of foreign selling

India is under a different kind of strain. Foreign institutional investors were net sellers of Indian equities for a tenth straight week, according to IANS. The amount eased to Rs 2,697 crore from Rs 8,991 crore the week before.

Domestic institutional investors were net buyers for the tenth week running, at Rs 10,942 crore. For October so far, IANS puts foreign net selling at Rs 51,466 crore against domestic net buying of Rs 59,110 crore.

The Nifty fell in all four sessions of the shortened week, touching an intra-week low of 22,372 on Friday. It closed the week down 2.4% at 22,600. The Nifty Midcap 100 lost 5.6% and the Nifty Smallcap 100 lost 7.3%.

Provisional NSE data for Oct. 16 show how choppy the flows have been. Foreign investors bought a net Rs 1,166 crore that day after selling Rs 5,285 crore on Oct. 15. Domestic institutions swung from net buying of Rs 3,319 crore to net selling of Rs 3,661 crore.

September was worse. The Nifty fell 6.1% that month to close at 22,620. DSP Mutual Fund's October dashboard shows foreign investors pulled $3.8 billion from Indian equities in September, while domestic mutual funds put in ₹38,300 crore.

Analysts cite elevated crude oil, rising U.S. bond yields and a weaker rupee as pressures. Brent rose above $105 a barrel before easing to around $90, and the U.S.-Iran and Russia-Ukraine conflicts remain on investors' radar. Vipin Kumar of Globe Capital Markets said the chart structure stays negative while the Nifty trades below 22,850 to 23,000.

Bernstein cut its December 2026 Nifty 50 target to 25,000 from 26,000. The brokerage added that a cut in long-term capital gains tax alone cannot trigger sustained foreign inflows.

What comes next

Indian investors are watching the U.S. Federal Reserve and Bank of Japan rate decisions in the coming week, along with U.S. GDP data.

In France, the Assembly's Oct. 27 resumption of debate on the budget's tax measures is the first test of whether the 2027 deficit target survives. The Nov. 5 strikes follow nine days later.