Foreign portfolio investors (FPIs) have injected nearly ₹10,000 crore into Indian bonds over four trading sessions, marking a significant reversal from recent outflows. This surge in investment comes in the wake of tax exemptions on eligible debt gains and expanded investment options, which have bolstered investor confidence in India's debt market.
Since the onset of the US-Israel conflict with Iran, FPIs had been net sellers, offloading over ₹10,119 crore in debt. The average daily selling was around ₹1,000 crore, with only occasional buying. However, recent measures by the Indian government and the Reserve Bank of India (RBI) have successfully shifted investor sentiment.
The decline in bond yields further indicates a positive outlook among investors. The government's tax exemptions on certain debt gains and the RBI's expanded investment options have played a pivotal role in this turnaround.
The renewed interest from foreign investors underscores a growing confidence in India's economic stability and the potential for attractive returns in the debt market.
Background
The recent inflow of foreign investment into Indian bonds comes after a period of significant outflows, driven by geopolitical tensions and market uncertainties. The measures taken by the Indian government and the RBI are seen as strategic moves to stabilize the market and attract foreign capital.
As the market adjusts to these changes, the focus will be on how sustained this interest from FPIs will be and the broader implications for India's financial markets.
