Foreign portfolio investors have poured a record ₹39,640 crore into Indian government bonds in June
The surge follows tax exemptions on capital gains and an expanded Fully Accessible Route, including 30-year GSecs
The rupee has strengthened, yields have eased, but analysts warn against overreading one month’s data
FPIs Log Highest-Ever Monthly Inflow into Indian Government Bonds
The inflows have had a stabilising effect on financial markets. The rupee, which had hit a record low of 96.96 per dollar in late May, recovered to close at 94.40 on Thursday
FPIs Log Highest-Ever Monthly Inflow into Indian Government Bonds
Summary
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Foreign portfolio investors (FPIs) have purchased a record ₹39,640 crore (approximately $4.2 billion) worth of Indian government securities (GSecs) in June so far — by far the largest monthly inflow into Indian debt instruments on record.
The previous high of ₹22,005 crore was set in August 2024, as per a report by The Economic Times (ET).
The sharp rise in demand follows a coordinated set of measures by the government and the Reserve Bank of India (RBI), which exempted capital gains on eligible sovereign debt investments and broadened the pool of bonds available under the Fully Accessible Route (FAR), including 30-year securities.
Market participants say the tax exemption has significantly raised expectations of Indian debt being admitted into Bloomberg's global aggregate index.
RBI's measures have alleviated concerns regarding rupee depreciation, while tax exemptions for FPIs have boosted optimism about India's potential inclusion in Bloomberg's global aggregate index, said Sameer Karyatt, MD and head of trading, DBS Bank, as per ET.
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These factors have prompted some investors to invest proactively in India, a trend I expect to continue unless there are major shifts in the global geopolitical environment, he added.
Rupee and Yields Respond
The inflows have had a stabilising effect on financial markets. The rupee, which had hit a record low of 96.96 per dollar in late May, recovered to close at 94.40 on Thursday.
The 10-year benchmark yield has eased by 20 basis points since the policy measures were announced, closing at 6.76%, per CCIL data cited by ET. Foreign exchange reserves stood at $672 billion as of 12 June.
Experts Urge Caution
The June surge stands in stark contrast to the broader FY26 picture — net FPI inflows into FAR bonds for the full fiscal year stood at just ₹3,546 crore, per CCIL data.
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Some analysts caution against reading too much into a single month's figures, noting that elevated US Treasury yields continue to limit the relative appeal of Indian government debt, as per ET.