Foreign Portfolio Investors Show Confidence in India’s Debt Market with Rs 18,500 Crore Infusion in February

FPIs exhibit growing interest in India's debt market, injecting Rs 18.5k Cr in Feb, influenced by attractive yields, stable macro indicators, and anticipation of bond index inclusion in June 2024. Total 2024 FPI investment surpasses Rs 38.4k Cr.
FPI Boost Indias Debt Market With Rs 18k Cr in Feb

Foreign Portfolio Investors (FPIs) have demonstrated a growing interest in India’s debt market, with a notable infusion of over Rs 18,500 crore so far in February. This surge in investment comes on the heels of an even more substantial inflow in January, where FPIs invested over Rs 19,836 crore, marking the highest monthly inflow in over six years since June 2017’s investment of Rs 25,685 crore.

In contrast, the equity market saw a withdrawal of Rs 424 crore by foreign investors during the same period, following a significant pullout of Rs 25,743 crore in January, according to depository data.

The attraction towards the debt market this month, amounting to a net investment of Rs 18,589 crore up to February 23, has brought the total FPI investment in 2024 to over Rs 38,426 crore. This continued interest in debt investments has been influenced by several factors, including the promise of attractive yields, India’s stable macroeconomic indicators, and the relative stability of the rupee.

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A significant driver of this investment trend is the upcoming inclusion of Indian government bonds in the JP Morgan Emerging Market Index from June 2024, announced last September. This inclusion is expected to attract an additional USD 20-40 billion into the market over the next 18 to 24 months, enhancing the accessibility of Indian bonds to foreign investors and potentially strengthening the rupee and the overall economy.

In 2023, FPIs collectively infused Rs 2.4 lakh crore into the Indian capital market, with Rs 1.71 lakh crore directed towards equities and Rs 68,663 crore into the debt market. This marks a rebound from 2022’s net outflow of Rs 1.21 lakh crore, driven by global central banks’ aggressive rate hikes, and underscores the renewed confidence of FPIs in the Indian market.

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