FPI Holdings in FAR G-Secs Fall ₹4,634 Crore as Middle East Conflict Rattles Markets

Foreign portfolio investors' (FPI) bets in Fully Accessible Route (FAR) government securities have declined by about ₹4,634 crore since the start of the Middle East conflict, reflecting growing caution among overseas investors amid rising crude oil prices, a weakening rupee and rising bond yields.

Data from the Clearing Corporation of India Ltd (CCIL) showed that total FPI investment in FAR securities stood at about ₹3.26 lakh crore on Tuesday, down from ₹3.31 lakh crore on February 27, before the conflict began.

The selling pressure has emerged as global markets reacted sharply to escalating tensions in the Middle East, which have triggered a spike in crude oil prices and volatility in emerging market assets.

Brent crude prices have surged past $100 per barrel and were trading around $108 per barrel, raising concerns about inflationary pressures and India's external balance.

At the same time, the rupee weakened sharply to below 92 against the US dollar, while the benchmark 10-year government bond yield rose to 6.7532%.

Market participants said the combination of higher oil prices and currency depreciation has made foreign investors more cautious towards Indian sovereign debt.

"FPIs have turned net sellers in March after cumulative buying of around ₹22,000 crore during January and February," Mataprasad Pandey, Vice President at Arete Capital (Choice Group), said.

"Rising crude oil prices due to the escalating US-Israel-Iran conflict, along with the rupee weakening beyond 92 against the dollar, has made foreign investors cautious toward Indian sovereign debt," he said.

The recent outflows mark a reversal in trend after strong inflows earlier this year, when expectations of India's inclusion in global bond indices and relatively stable macroeconomic conditions had attracted foreign investors to local government debt.