FPIs turn net debt buyers after 3 yrs

Low volatility, stable rupee, Russia exit drive purchases

- Ram Sahgal & Shayan Ghosh

Foreign portfolio investors (FPIs) have turned net buyers of Indian debt for the first time in four years, driven by low volatility in bond yields, a stable currency, reallocations from Russia, and expectations of a sovereign rating upgrade and inclusion in a global bond index, market experts said.

The investors purchased a net ₹16,722 crore worth of Indian government and corporate bonds in the calendar year through June. FPIs net sold Indian bonds worth ₹1.31 trillion in the past three years ending 2022. The last time they were net buyers was in 2019, when they purchased ₹25,882 crore worth of bonds

“I think it is to do with global fund managers reallocating funds to other EMs (emerging markets) like India from Russia, consequent to the Ukraine war, coupled with a stable currency and Indian bond yields remaining relatively less volatile," said Madan Sabnavis, chief economist, Bank of Baroda.