Daily inflows from foreign portfolio investors (FPIs) through the fully accessible route (FAR) have surged to record levels in June, driven by recent government reforms and a stable geopolitical environment.
According to data from the Clearing Corp of India, FPIs invested ₹33,000 crore in June, a substantial increase from ₹5,512 crore in May. This marks the highest investment in this category in the past year, surpassing the previous peak of ₹12,246 crore in October 2025.
HDFC Bank's successful $750 million offshore bond issuance, the first to utilize the RBI's 1.5% fixed-rate swap, highlights the growing interest in Indian securities. This issuance saw strong demand, particularly from Asian investors, and is expected to be followed by other major banks and public sector units.
“The de-categorisation of sub-limits, simplifying processes and widening of the list of specified securities for FPIs to invest have clearly spurred these new investments.”
Ajay Manglunia, head of fixed income at Capri Global Capital
The government's reforms included the removal of short-term investment limits and the merging of sub-categories of investment limits for FPIs. Additionally, taxes on long-term capital gains and interest earned on government bonds have been eliminated, directly enhancing FPI returns.
Bankers caution that the continuation of this momentum will depend on various factors, including geopolitical stability and macroeconomic conditions. The potential inclusion of Indian securities in major global bond indices could further boost FPI inflows.
Background
The government's recent reforms have significantly enhanced the attractiveness of Indian government securities to foreign investors. By removing investment restrictions and offering tax incentives, the government aims to boost foreign investment and stabilize the economy.
Looking ahead, the focus will be on whether India's sovereign debt will be included in global bond indices, which could significantly enhance FPI inflows. The Reserve Bank of India and finance ministry officials are expected to engage with the Bank for International Settlements to discuss potential investments.
