New Delhi: Foreign Portfolio Investors (FPIs) continued their bullish stance in the country’s debt markets with a net infusion of over Rs 15,000 crore so far this month, thanks to the inclusion of Indian government bonds in the index JP Morgan along with a relatively stable economy.
This followed a net investment of Rs 19,836 crore in January, making it the highest monthly inflow in over six years. This was the highest inflow since June 2017, when they pumped in Rs 25,685 crore. (Also Read: Latest HDFC Bank FD Rates 2024: How Much Return Will You Get From Fixed Deposit? Check Here)
On the other hand, foreign investors withdrew more than Rs 3,000 crore from the stock during the period under review. Before this, they withdrew a huge amount of Rs 25,743 crore in January, depository data showed.
“The main trigger for this divergent trend in equities and debt is the high valuation in the Indian stock market and rising bond yields in the US,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India, attributed the capital outflow to the uncertainty surrounding the interest rate environment, both domestically and globally.
According to the data, FPIs made a net investment of Rs 15,093 crore in debt markets this month (till February 9). With this, the total investment by FPIs has reached over Rs 34,930 crore in 2024. They have been pumping money into the debt markets for the past few months.
FPIs pumped Rs 18,302 crore into the debt market in December, Rs 14,860 crore in November and Rs 6,381 crore in October. “Indian debt markets witnessed a reversal in FPI flow trend last year after the announcement of inclusion of Indian government bonds in the JP Morgan index. This was one of the major drivers of strong FPI flows , along with a relatively stable economy.” Srivastava said.
JP Morgan Chase & Co. announced in September last year that it will add Indian government bonds to its emerging markets benchmark index starting June 2024. This historic inclusion is expected to benefit India by attracting between 20 and 40 thousand billion dollars over the next 18 to 24 years. months.
This inflow is expected to make Indian bonds more accessible to foreign investors and potentially strengthen the rupee, thereby boosting the economy, he added. Overall, total FPI flows in 2023 stood at Rs 1.71 lakh crore in equity and Rs 68,663 crore in debt markets.
Together, they infused Rs 2.4 lakh crore into the capital market. The flow into Indian stocks came after the worst-ever net outflow of Rs 1.21 lakh crore in 2022 due to aggressive rate hikes by central banks globally. Before the exit, FPIs invested money in the last three years.