FPI inflows swell to ₹22,419 crore in debt markets; What's attracting them to Indian bonds?

livemint.com:

₹22,419 crore in Indian debt markets last month, extending the positive momentum picked up in 2023. The benchmark indexes Nifty 50 and BSE Sensex, which were little changed in January amid foreign outflows, gained more than one per cent last month on FPI buying and robust domestic inflows. FPI inflows are likely to increase further due to India's rising share in the MSCI Emerging Markets index, global brokerage firm CLSA said in a note.

India narrowed the gap with China in MSCI's Global Standard index, which tracks emerging market stocks for investors, after the latest revision. ‘’FPIs are steadily increasing their buying in debt market. They have bought debt to the tune of ₹22,419 crore in February on top of the ₹19,836 crore which they bought in January.

This trend of steady debt investment is likely to continue,'' said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services. Index provider MSCI raised India's weightage to an all-time high of 18.2 per cent, which came into effect at the end of February.

India could witness up to $1.2 billion of passive foreign flows after the MSCI February review, Nuvama Alternative and Quantitative Research said in a note. "It is crucial to acknowledge the strong macroeconomic, corporate fundamentals and macro stability that underpin India's equity markets and their valuations," said Mike Shiao, chief investment officer, Asia ex-Japan at Invesco. Among individual sectors, auto and pharma stocks saw buying interest, while foreign selling continued in financials.