As per the information on Nationwide Securities Depository Ltd (NSDL), FPIs’ internet funding within the nation’s debt markets stood at ₹121,059 crore for FY24. This was the best FPI influx within the debt market since FY 2014-15, after they infused ₹130,302 crore.

The month of February noticed the best month-to-month influx price ₹22,419 crore in FY24. FPI inflows within the debt market gathered steam in H2FY24 amid the bulletins of the inclusion of Indian bonds in varied international bond indices.

Learn right here: JPMorgan to incorporate India in its rising market debt index, paving the way in which for billions in inflows

In September 2023, JP Morgan Chase & Co. introduced that it might add Indian authorities bonds to its benchmark International Bond Index Rising Markets Index (GBI-EM). It had mentioned that 23 Indian authorities bonds, with a mixed nominal worth of $330 billion, had been discovered eligible to be added to the index.

Final month, the Bloomberg Index Providers mentioned it is going to additionally embody 34 Indian authorities bonds eligible for funding by way of the nation’s totally accessible route (FAR) in its Rising Market Native Foreign money Index from January 31 subsequent 12 months.

Learn right here: Bloomberg so as to add Indian bonds to EM debt indexes from January 2025

In the latest improvement, Abrdn Plc additionally introduced to extend its funding in Indian sovereign bonds as a consequence of their interesting yields.

The inclusion of bonds in these indices is anticipated to deliver an funding of roughly $20 billion to $30 billion. Nonetheless, this funding will start solely by June 2024, and, due to this fact, FPIs are performing some entrance working given this potential funding, analysts mentioned.

“FPI debt flows have gathered momentum since November 2023 due to sentiment shopping for publish announcement of India’s inclusion to JP Morgan International Bond Index. Additional India’s buoyant progress story coupled with fiscal prudence, leveraged sentiments of international traders at a time when nonetheless a point of uncertainty prevailed over the outlook of the worldwide financial system,” mentioned Financial institution of Baroda Economist Dipanwita Mazumdar in a be aware.

She expects volatility within the greenback index and US treasury yield to additionally act as a catalyst for extra flows into the Indian debt market. 

Additionally Learn: Index inclusion a recreation changer for Indian fixed-income markets: Vishal Goenka of IndiaBonds.com

The appreciable frontloading by FPIs supported India’s 10-year authorities bond yield in FY24. Moreover, the nation’s buoyant progress situation coupled with fiscal prudence and RBI’s efficient liquidity administration operations have remained constructive for yields. 

“Going ahead, we count on India’s 10-year yield to have an extra downward bias. We don’t rule out the opportunity of yields reaching beneath 6.95% from H2 onwards when beneficial growth-inflation dynamics would immediate a price discount by RBI. It’s attainable that in June 2024, when the US Federal Reserve price minimize cycle kicks in, some softening bias will prevail for India’s home yield,” mentioned Mazumdar.

Help will come from FPI flows. If the RBI does decrease the repo price primarily based on inflation and monsoon circumstances presumably from August onwards, it might be of the order of 25-50 bps. This will decrease the 10-year yield to six.75%, she added.

In the meantime, FPIs purchased Indian equities price ₹208,212 in the course of the earlier fiscal 12 months. Total, the entire FPI flows into Indian capital markets for FY24 was at ₹3.39 lakh crore, together with equities, debt, debt VRR and hybrid investments.

Disclaimer: The views and proposals made above are these of particular person analysts or broking firms, and never of Mint. We advise traders to verify with licensed specialists earlier than making any funding selections.

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Printed: 01 Apr 2024, 03:35 PM IST