Foreigners ditch stocks, deepen their India bond

Indian bonds surged to the highest in nearly a decade this financial year, mitigating the impact of sustained equity outflows barring the last ten days of March, as the country's inclusion in major international sovereign debt indices and North Block's robust fiscal discipline help expand the global market for local debt.

Foreign institutional investors (FIIs) have pumped ₹1.43 lakh crore into Indian debt in FY25 — the highest ever recorded since FY15, showed data compiled by IndiaBonds.

India now features on three major global bond indices. The JPMorgan Emerging Market Bond Index is expected to bring $30 billion in inflows, while the FTSE Emerging Markets Government Bond Index is projected to draw in $5 billion. Inclusion of sovereign debt on the Bloomberg Emerging Markets Bond Index could pave the way for another $5 billion worth of overseas money.

The JPMorgan index inclusion, which began in June 2024, has already attracted long-term foreign capital.

«Foreign investors typically begin with government securities through index trackers before expanding into public sector and corporate bonds,» said Vishal Goenka, co-founder of IndiaBonds. «This shift will increase in the next two to three years.»

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Unlike previous years, when equities dominated foreign inflows, debt instruments have emerged as the preferred asset class lately.

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While Indian equity inflows turned negative since the latter half of FY25, debt markets have remained a stable bet for global investors.

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