FPIs infuse ₹18,500 cr in debt mkt

Foreign Portfolio Investors (FPIs) continued their bullish stance on the country’s debt markets with a net infusion of over ₹18,500 crore so far this month, driven by upcoming inclusion of Indian government bonds in the JP Morgan Index.

This came following a net investment of over ₹19,836 crore in January, making it the highest monthly inflow in more than six years. This was the highest inflow since June 2017, when they infused ₹25,685 crore.

“With introduction of India in global bond indices this year, Indian debt inflows should get steady flows going ahead. Also, further front-loading before actual inclusion in June this year is also expected. This is also in line with long-term aim to deepen our underdeveloped debt-markets,” Kislay Upadhyay, smallcase Manager & Founder Fidelfolio, said.

On the other hand, foreign investors pulled out ₹424 crore from equities during the period under review. Before this, they withdrew a massive ₹25,743 crore in January, data with the depositories showed.

According to the data, FPIs made a net investment of ₹18,589 crore in the debt markets this month (till February 23). With this, the total investment by FPIs reached over ₹38,426 crore in 2024. They have been injecting money in the debt markets for the past few months.

FPIs infused ₹18,302 crore in the debt market in December, ₹14,860 crore in November, and ₹6,381 crore in October. The upcoming inclusion in JP Morgan EMBIGD in June 2024 is a major driver for the huge inflow in the debt market, Bhuvan Rustagi, Co-Founder and COO, Per Annum and Lendbox, said.

Additionally, attractive yield, stable macroeconomic indicators and relatively stable rupee too attracted FPIs towards the debt market. JP Morgan Chase & Co. in September last year announced that it will add Indian government bonds to its benchmark emerging market index from June 2024.

This landmark inclusion is anticipated to benefit India by attracting around $20-40 billion in the subsequent 18 to 24 months. This inflow is expected to make Indian bonds more accessible to foreign investors and potentially strengthen the rupee, thereby bolstering the economy.