FPIs Pump Nearly Rs 40,000 Crore Into Government Bonds In June After RBI, Govt Measures

Foreign portfolio investors (FPIs) have invested a record nearly Rs 40,000 crore in Indian government securities (G-Secs) so far in June, driven by recent policy measures announced by the Reserve Bank of India (RBI) and the government to make the domestic bond market more attractive for overseas investors.

According to data cited by The Economic Times (ET), FPIs purchased Rs 39,640 crore worth of government bonds during the month, surpassing the previous monthly record of Rs 22,005 crore set in August 2024.

The sharp rise in inflows follows a series of measures aimed at boosting foreign participation in India’s debt market. These include exempting capital gains tax on eligible sovereign debt investments by foreign investors and expanding the list

of securities available under the Fully Accessible Route (FAR). The authorities have also allowed overseas investors to invest in government securities with maturities of up to 30 years.

Market participants believe these steps have strengthened expectations that Indian government bonds could be included in Bloomberg’s Global Aggregate Bond Index, a move that could attract additional foreign capital.

According to ET, Sameer Karyatt, managing director and head of trading at DBS Bank, said the RBI’s measures have eased concerns over rupee depreciation, while the tax exemption has improved optimism around India’s potential inclusion in Bloomberg’s global bond index. He added that the recent inflows could continue unless there are significant geopolitical disruptions.

The inflows are also expected to support India’s foreign exchange reserves, which stood at $672 billion as of June 12. During the same period, the rupee recovered from its record low of 96.96 against the US dollar in late May to close at 94.40 on Thursday. The yield on the benchmark 10-year government bond has also softened by around 20 basis points since the policy announcements, reflecting strong demand for sovereign debt.