Foreign Portfolio Investors (FPIs) have shown a strong interest in the Indian debt market, infusing about Rs 12,400 crore in November. This marks the highest inflow in over two years, driven the attractive yields offered India’s debt.
The recent inclusion of Indian G-Sec in the JP Morgan Government Bond Index Emerging Markets has played a significant role in encouraging foreign fund participation in the Indian bond markets. Data from depositories revealed that despite a pullout in March, FPIs have been bullish on Indian debt throughout the year, with a net investment of Rs 47,900 crore so far in 2023.
In November, overseas investors poured Rs 12,400 crore into the debt market, a number not seen since September 2021. This comes after a net investment of Rs 6,382 crore in October. Market experts attribute this trend to the relatively attractive nature of Indian debt compared to debt in other emerging markets, offering a higher yield compared to developed markets.
In addition to the strong inflow in the debt market, FPIs also invested a net amount of Rs 378 crore in the equity markets during the same period. This shift in trend follows significant sell-offs in equities in October and September.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that the decline in US inflation in mid-October has boosted market confidence, leading to a slowdown in FPI selling. Overall, the cumulative trend for 2023 remains healthy, with FPIs injecting Rs 96,340 crore into the Indian markets so far this year.