FPIs Invest Record ₹53,300 Crore in Indian Debt, Offsetting Equity Outflows in June
Foreign Portfolio Investors (FPIs) made a record investment of ₹53,363 crore in Indian debt securities in June, compensating for nearly equal equity outflows and resulting in a net inflow of ₹334 crore for the month, according to data from the National Securities Depository Limited (NSDL). This marks the first month of net inflow in the current calendar year.
Debt investments are categorised under General Limit, Voluntary Retention Route (VRR), and Fully Accessible Route (FAR). A significant portion of these inflows went into government securities. Inflows under the General Limit and FAR stood at ₹28,196 crore and ₹21,788 crore respectively in June. FAR bond investments surged fivefold compared to the previous month, while General Limit investments swung from an outflow of ₹100 crore in May to a robust inflow in June.
The surge in debt inflows follows the Union Ministry of Finance's decision to exempt government securities from long-term capital gains tax and extend the tenors of bonds under the FAR category. These measures aim to deepen the bond market and attract foreign capital amid a broader trend of foreign investor caution towards Indian markets. High equity valuations and a depreciating rupee have contributed to subdued returns, leading to continued equity outflows.
Equity outflows persisted for the fourth consecutive month, totalling ₹51,456 crore in June. Over the past six months, cumulative equity outflows reached ₹2.76 lakh crore. However, the debt inflows helped offset these outflows, resulting in an overall net inflow of ₹334 crore for June.
The pace of equity outflows moderated in the second half of June as the rupee appreciated, partly driven by easing geopolitical tensions between the United States and Iran. Analysts note that improved global conditions, independent of domestic tax policy changes, also contributed to slower outflows.
