INVC NEWS
Mumbai : The Foreign Portfolio Investors (FPIs) orchestrated a substantial investment of ₹19,800 Crore into India’s debt or bond market in the month of January. This surge represents the highest monthly influx of FPI funds into the bond market in the past six years, signifying a robust and strategic move by these investors.
FPIs’ Affinity for Indian Bonds Surges Post JP Morgan Inclusion
The heightened attraction of FPIs towards the Indian bond market can be attributed to the recent inclusion of Indian Government bonds in the JP Morgan index. This pivotal development has substantially increased the allure of FPI investments in the Indian debt market. Conversely, as bond yields in the United States soared, FPIs tactically withdrew ₹25,743 Crore from Indian stocks in January, seeking more lucrative returns in the bond sector.
Depository data reveals that FPIs injected a staggering ₹19,836 Crore into the bond market in January, marking the highest monthly level of their investment since June 2017 when their contributions amounted to ₹25,685 Crore. This surge supersedes the capital inflows observed in the preceding months, with FPIs investing ₹18,302 Crore in December, ₹14,860 Crore in November, and ₹6,381 Crore in October.
FPI Inflow Aligned with India’s Fixed Income Market
Financial experts assert that FPIs are strategically aligning their investment decisions with the predictable income market in India. The recent inclusion of Indian government bonds in the JP Morgan index has been a driving force behind this surge. Last year, in September, JP Morgan Chase & Co. made a historic announcement that Indian government bonds would be included in its emerging market benchmark, effective from June 2024.
This historic milestone is anticipated to attract an estimated investment ranging from $20 to $40 billion to India in the next one and a half to two years. Market analysts highlight that Finance Minister Nirmala Sitharaman’s commitment to reducing the fiscal deficit to 5.1% of the Gross Domestic Product (GDP) in the fiscal year 2024-25, as stated in her budget speech, has further positively influenced the bond market.
