FPI inflows in debt market at nine-year high of ₹1.21 lakh crore in FY24; likely to help soften bond yields

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₹1.21 lakh crore in India’s debt market during the financial year 2023-2024, the highest yearly inflow in more than nine financial years. As per the data on National Securities Depository Ltd (NSDL), FPIs’ net investment in the country’s debt markets stood at ₹121,059 crore for FY24. This was the highest FPI inflow in the debt market since FY 2014-15, when they infused ₹130,302 crore.

The month of February saw the highest monthly inflow worth ₹22,419 crore in FY24. FPI inflows in the debt market gathered steam in H2FY24 amid the announcements of the inclusion of Indian bonds in various global bond indices. Read here: JPMorgan to include India in its emerging market debt index, paving the way for billions in inflows In September 2023, JP Morgan Chase & Co.

announced that it would add Indian government bonds to its benchmark Global Bond Index Emerging Markets Index (GBI-EM). It had said that 23 Indian government bonds, with a combined nominal value of $330 billion, were found eligible to be added to the index. Last month, the Bloomberg Index Services said it will also include 34 Indian government bonds eligible for investment via the country's fully accessible route (FAR) in its Emerging Market Local Currency Index from January 31 next year.

Read here: Bloomberg to add Indian bonds to EM debt indexes from January 2025 In the most recent development, Abrdn Plc also announced to increase its investment in Indian sovereign bonds due to their appealing yields. The inclusion of bonds in these indices is expected to bring an investment of roughly $20 billion to $30 billion. However, this investment will begin only by June 2024, and, therefore, FPIs are doing some front running given this potential investment, analysts said.