Foreign portfolio investors (FPIs) continue to be bullish on the country’s debt market, with net inflows of over Rs 15,000 crore so far this month, given the inclusion of Indian government bonds in the JPMorgan index and the relative stability of the economy. Prior to this, net investments were recorded at Rs 19,836 crore in January, the highest monthly inflow in more than six years. This is the highest inflow since June 2017, when Rs 25,685 crore was injected.

On the other hand, foreign investors withdrew over Rs 3,000 crore from the stock market during the reporting period. This follows a huge withdrawal of Rs 25,743 crore in January, data from depository institutions showed. “The main triggers for this divergent trend in equities and debt are high valuations in Indian equities and rising US bond yields,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

Himanshu Srivastava, associate director, manager research, Morningstar Investment Research India, attributed the outflows from the stock market to uncertainty in the domestic and global interest rate environment. Data showed that FPI’s net investment in the debt market this month (as of February 9) was Rs 15,093 crore.

With this, the total investment by FPIs will exceed Rs 34,930 crore by 2024. They have been pouring money into debt markets over the past few months.

FPIs injected Rs 18,302 crore into the debt market in December, Rs 14,860 crore in November and Rs 6,381 crore in October. “Following the announcement last year of inclusion of Indian government bonds in JPMorgan indices, the trend in FPI flows in the Indian debt market reversed. This is one of the key drivers of strong FPI flows coupled with a relatively stable economy,” Srivastava said.

JPMorgan Chase announced in September last year that it would include Indian government bonds in its benchmark emerging market index from June 2024. This landmark inclusion is expected to benefit India, attracting approximately $20 to $40 billion in funding over the next 18 to 24 months.

The inflow is expected to make it easier for foreign investors to buy Indian bonds and potentially appreciate the rupee, boosting the economy, he added. Overall, FPI flows in the equity market totaled Rs 1.71 billion in 2023 and in the debt market totaled Rs 68,663 crore.

In total, they have injected Rs 2.4 billion into the capital market. The Indian stock market saw its worst net outflow of Rs 1.21 billion in 2022 as global central banks sharply raised interest rates. Prior to the outflow, foreign investors had invested over the past three years.

(This story has not been edited by News18 staff and is published from associated news agency – PTI)