Foreign investment inflows in markets hit record high on JPMorgan boost
MUMBAI : Overall inflows from foreign investors have hit a record high of ₹2.74 trillion this fiscal year, chiefly due to front-loading of government bond purchases by global banks and traders. This follows JP Morgan’s decision to include Indian government bonds in its government bond index-emerging markets (GBI-EM) from June.
Market experts say the move could attract $25 billion in inflows from passive trackers such as debt exchange-traded funds (ETFs) and index funds. The break-up of net inflows this fiscal, as of 16 February, was ₹1.68 trillion into equity, ₹1.01 trillion into debt, a negative ₹0.06 trillion through the debt voluntary retention route (debt-VRR), and ₹0.11 trillion into hybrid instruments, including debt, equity and commodities such as gold, according to securities depository National Securities Depository Limited (NSDL).
Debt-VRR enables foreign portfolio investors to invest in debt markets free of macro-prudential and other regulatory rules applicable to FPI (foreign portfolio investor) investments, provided they voluntarily commit to retain a minimum percentage of their investments in India for a specified period of time, according to law firm Shardul Amarchand Mangaldas. Apart from the front-loading of bond purchases, expectations of lower interest rates in the second half of FY25 and a relatively stable rupee also attracted foreign investments into debt, fund experts said.
“There are a host of factors for Indian debt turning attractive to foreign investors," said Ashish Gupta, chief investment officer, Axis Mutual Fund. “Indian government bonds’ inclusion in the JPMorgan Bond index is one of the main ones, [with the] probable inclusion into the Bloomberg bond index, anticipation of lower interest
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