January Sees FPIs’ Debt Market Investment Soar to Six-Year High, Reaching Rs 19,800 Crore

Foreign Portfolio Investors (FPIs) recorded a substantial inflow of over Rs 19,800 crore into India’s debt market in January, marking the highest monthly influx in over six years. This surge is attributed to the inclusion of Indian government bonds in the JP Morgan Index. However, FPIs withdrew Rs 25,743 crore from Indian equities last month due to rising bond yields in the US.

Data from depositories reveals that FPIs made a net investment of Rs 19,836 crore in the debt markets in January, the highest since June 2017. In the preceding months, FPIs injected Rs 18,302 crore in December, Rs 14,860 crore in November, and Rs 6,381 crore in October.

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Himanshu Srivastava, Associate Director-Manager Research at Morningstar Investment Research India, highlighted that the inclusion of Indian government bonds in the JP Morgan Index contributed to robust net inflows of USD 2.39 billion in January. This move, announced by JP Morgan Chase & Co. in September, is expected to attract around USD 20-40 billion in the next 18 to 24 months, potentially enhancing the accessibility of Indian bonds to foreign investors and strengthening the rupee.

Experts also noted Finance Minister Nirmala Sitharaman’s positive impact on the debt market by aiming to reduce the fiscal deficit to 5.1 percent of GDP for FY25. The absence of populist measures in the interim Budget is seen as a prudent step to trim the fiscal deficit to 5.1 percent of GDP in the next fiscal year and 4.5 percent in FY26.

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In 2023, the total FPI flows amounted to Rs 1.71 lakh crore in equities and Rs 68,663 crore in the debt markets, totaling Rs 2.4 lakh crore in the capital market. This positive trend in Indian equities follows a significant net outflow of Rs 1.21 lakh crore in 2022, attributed to aggressive rate hikes by central banks globally. Before the outflow, FPIs had invested money in the last three years.