FPIs Investment In Debt Market Touches 6-Year High In January At Rs 19,800 Crore

However, the investors withdrew Rs 25,743 crore from Indian equities during the period under review, due to the elevated bond yields in the US, official data with depositories revealed

Market analysts said that FM Sitharaman's decision to lower the fiscal deficit target to 5.1 per cent of the GDP for the upcoming fiscal year remained positive for the debt markets in the future

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Foreign Portfolio Investors (FPIs) poured over Rs 19,800 crore in India’s debt market in January, after JP Morgan included the Indian government bonds in its index. The investment became the highest monthly inflow seen in over six years. 

However, the investors withdrew Rs 25,743 crore from Indian equities during the period under review, due to the elevated bond yields in the US, official data with depositories revealed. The FPIs invested Rs 19,836 crore in the debt markets in January, which marked the highest influx of fund seen since June 2017, when they poured in Rs 25,685 crore, reported PTI. Prior to this, the investors infused the debt market with Rs 18,302 crore in December, Rs 14,860 crore in November, and Rs 6,381 crore in October. 

Commenting on the market movements, Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment Research India, said, “Indian fixed income markets witnessed robust net inflows from FPIs to the tune of USD 2.39 billion in January on the back of inclusion of Indian government bonds in the JP Morgan Index. 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 USD 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.”

Further, market analysts noted that the decision from Finance Minister Nirmala Sitharaman to lower the fiscal deficit target to 5.1 per cent of the GDP for the upcoming fiscal year remained positive for the debt markets in the future. In the Interim Budget 2024, the Finance Minister said the government will aim to achieve a fiscal deficit target of 4.5 per cent for the 2025-26 fiscal year. 

Notably, the interim Budget is a vote-on-account only, making it a formality before the upcoming elections. Overall, the FPI flows for 2023 touched Rs 1.71 lakh crore in equities and Rs 68,663 crore in the debt markets. Cumulatively, they poured in Rs 2.4 lakh crore into the capital market. 

Earlier in 2022, the net outflow stood at Rs 1.21 lakh crore, amidst aggressive rate increases by central banks in the world.