Indian Debt Market Remains A Favourite For FPIs As Inflow Crosses Rs 1 Lakh Crore In 2024

This infusion in the debt market was credited to the inclusion of the Indian securities in JP Morgan’s Emerging Market government bond indices earlier this year in June

Foreign portfolio investors continued to withdraw from Indian equities, however, their infusion in the Indian debt market in 2024 so far crossed the Rs 1 lakh crore mark. The investors poured in Rs 11,366 crore in the debt market in the month so far, as of August 24, 2024. Meanwhile, the FPIs dumped Indian equities worth Rs 16,305 crore in August so far, official data from the depositories revealed.

This infusion in the debt market was credited to the inclusion of the Indian securities in JP Morgan’s Emerging Market government bond indices earlier this year in June, reported PTI. Before August, the investors infused Rs 22,363 crore in the debt market in July, and Rs 14,955 crore in June. Now, the overall inflow in the debt market stands at Rs 1.02 lakh crore in 2024.

The analysts noted that the Indian debt market has become a favourites for investors ever since it was announced last year that India would be included in the emerging markets index. In the anticipation of this inclusion, the investors have been heavily pouring in their funds in the segment and this has continued even after the inclusion of the domestic securities.

The outflow from Indian equities was attributed to the unwinding of the yen carry trade, continuing geopolitical conflicts, and fears of recession in the US economy.

Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, noted, “The post-budget announcement of an increase in capital gains tax on equity investments has largely fueled this selling spree. In addition, FPIs have been cautious due to the high valuations of Indian stocks, coupled with global economic concerns such as rising recession fears in the US amid weak jobs data, uncertainty over the timing of interest rate cuts, and the unwinding of yen carry trade.”

Manoj Purohit, Partner and Leader, Financial Services Tax, Tax & Regulatory Services, BDO India, explained that the country remains in a position where it is being preferred for long-term investments from FPIs. “Amidst a global slowdown, geo-political crisis in the middle east and neighbouring countries, India still stands at a sweet spot compelling the foreign fraternity to take a bet for a long term investment horizon,” the expert stated.