Foreign Portfolio Investors (FPIs) have poured in a staggering amount of Rs 12,400 crore into the Indian debt markets in November, marking the highest inflow in more than two years. This surge in investment is a result of the attractive yields offered by India’s debt, which has caught the attention of foreign funds.
Experts attribute this significant inflow to the inclusion of Indian G-Sec in the JP Morgan Government Bond Index Emerging Markets, which has sparked foreign fund participation in the Indian bond markets. Data from depositories revealed that FPIs have been bullish on Indian debt since the beginning of 2023, with the exception of March when they pulled out Rs 2,505 crore.
The latest infusion of Rs 12,400 crore has brought the net investment by FPIs into Indian debt to a substantial Rs 47,900 crore so far this year, solidifying their confidence in the Indian debt market. Alongside the strong investment in debt, FPIs also directed a net amount of Rs 378 crore into the equity markets, following a period of significant divestment in October and September.
Bhuvan Rustagi, COO and Co-Founder of Per Annum and Lendbox, stressed that Indian debt is particularly appealing compared to debt in other emerging markets, offering a relatively high yield in comparison to debt in developed markets.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, pointed out that the decline in US inflation in mid-October has provided the market with confidence that the Fed may refrain from a rate hike, leading to a sharp decline in US bond yields. This shift has prompted FPIs to slow down their selling, resulting in a more positive trend for 2023, with FPIs pouring in a total of Rs 96,340 crore so far this year.
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