Ira Singh 
Foreign Portfolio Investors (FPIs) have maintained their bullish stance on India's debt market, injecting a robust Rs.11,366 crore in August. The substantial inflows from foreign investors into the Indian debt market can be attributed to India's recent inclusion in JP Morgan's Emerging Market government bond indices in June. This inflow has pushed the cumulative tally for 2024 above the significant Rs.1 lakh crore mark, underscoring the growing confidence of global investors in India's fixed-income securities.
According to the latest data published by National Securities Depository Ltd (NSDL),Foreign Portfolio Investors (FPIs) injected Rs 11,366 crore in the debt market this month (till August 24). This inflow came following a net investment of Rs 22,363 crore into the Indian debt market in July, Rs 14,955 crore in June and Rs 8,760 crore in May.Before that, they pulled out Rs 10,949 crore in April. With the latest flow, FPIs net investment in debt has reached Rs 1.02 lakh crore in 2024 so far.
Since the announcement of India’s inclusion in October 2023, market analysts have noted that ,FPIs have been accelerating their investments in Indian debt markets in anticipation of the benefits of the global bond index inclusion. Even after the inclusion, their inflows have continued to remain robust. On the other hand, FPIs pulled out over Rs 16,305 crore from equities so far this month, due to unwinding of the yen carry trade, recession fears in the US and ongoing geopolitical conflicts, according to information. The surge in FPI investments comes amid a stable macroeconomic environment and attractive yields in the Indian debt market, driven by the Reserve Bank of India's (RBI) policy stance and inflation control measures. Market experts attribute the consistent inflows to favorable real interest rates and India's strong economic fundamentals, which continue to lure foreign investors.
Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, reportedly stated the post-budget announcement of an increase in capital gains tax on equity investments has largely fueled this selling spree.In addition, FPIs have been cautious due to the high valuations of Indian stocks, coupled with global economic concerns such as rising recession fears in the US amid weak jobs data, uncertainty over the timing of interest rate cuts, and the unwinding of yen carry trade, he added.
Meanwhile,even in the face of a global economic uncertainty and ongoing geopolitical tensions in the Middle East and neighboring areas, India is seen as a strong contender for long-term FPI inflows. Experts believe that the country’s favorable growth trajectory and stability continue to make it an attractive bet for foreign investors.
(Writer is a Finance Research Analyst, based in Gandhinagar, Gujarat)
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