FPI inflows in debt mkt hit 2-yr high
Inclusion of Indian G-Sec in JP Morgan Government Bond Index Emerging Markets spurred foreign fund participation in domestic bond markets
image for illustrative purpose
Attractive Yields
- Foreign funds invest Rs12,400 cr in Nov
- FPIs bullish on Indian debt since throughout 2023
- FPI net investment in debt at Rs47,900 cr so far this year
- But only in March, they pulled out Rs2,505 cr
- US 10-yr bond yield fell from 5% to 4.4%
- It forced FPIs to slow down their selling
New Delhi: Foreign Portfolio Investors (FPIs) have infused about Rs12,400 crore into the Indian debt markets in November so far, making it the highest inflow in more than two years, on attractive yields offered by the country’s debt.
The inclusion of Indian G-Sec in the JP Morgan Government Bond Index Emerging Markets has spurred foreign fund participation in the Indian bond markets, market experts said.
“The better-than-expected decline in inflation in the US around mid-October has given the market confidence to assume that the Fed is done with a rate hike. Consequently, the US bond yields have declined sharply with the 10-year benchmark bond yield correcting from 5 per cent in mid-October to 4.4 per cent now. This has forced the FPIs to slow down their selling,” VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.
FPIs have been bullish on Indian debt since the beginning of 2023 and have invested throughout the year, except March, when they had pulled out Rs2,505 crore, data with the depositories showed. With the latest inflow, the net investment by FPIs into debt reached Rs47,900 crore so far this calendar year. According to the data, overseas investors put in a net amount of Rs12,400 crore into the debt market this month (till November 27). This was the highest inflow since September 2021, when they had poured Rs12,804 crore.
This came following a net investment of Rs6,382 crore in October. Indian debt is relatively attractive compared to debt in other emerging markets, and it offers a relatively high yield compared to debt in developed markets, Bhuvan Rustagi, COO and co-founder, of Per Annum and Lendbox, said. Apart from equities, FPIs pumped in a net amount of Rs378 crore in the equity markets during the period under review. This came after FPIs dumped equities worth Rs24,548 crore in October and Rs14,767 crore in September. Overall, the cumulative trend for 2023 remains healthy, with FPIs pouring in Rs96,340 crore so far this calendar year.
