Home / Business and Economy / India Bonds See FPI Inflow Surge After Policy Shift
India Bonds See FPI Inflow Surge After Policy Shift
14 Jun
Summary
- FPIs bought ₹11,087 crore in government securities last week.
- Inflows in June are highest in 15 months at ₹15,895 crore.
- Tax removal on capital gains and interest income by the government.
Foreign portfolio investors (FPIs) have substantially boosted their investment in Indian government securities, purchasing ₹11,087 crore in the past week alone. This surge in activity is a direct response to recent measures announced by the Indian government and the Reserve Bank of India (RBI) designed to attract foreign capital.
In June, FPI net purchases in government bonds have reached ₹15,895 crore, the highest recorded in 15 months. This follows moderate inflows of ₹5,693 crore in May and ₹5,081 crore in April. A significant policy change implemented on June 5 involved the removal of taxes on capital gains and interest income earned by FPIs, effective from April 1. Additionally, the RBI introduced measures including expanding eligible securities under the Fully Accessible Route (FAR) and introducing forex swap facilities.
These policy adjustments have improved market sentiment and strengthened the Indian rupee. The rupee appreciated by 79 paise to trade at 95.03 against the dollar. The yield on the benchmark 10-year government bond also declined by 10 basis points to 6.89%. Experts anticipate these reforms could attract approximately $50 billion in foreign debt inflows over time, potentially enhancing India's position for inclusion in global bond indices.
