Foreign Investors Pump Record ₹39,640 Crore Into Indian Govt Bonds In June

Overseas investors have invested a record ₹39,640 crore (around $4.2 billion) into Indian government bonds in June so far, marking the strongest monthly inflow ever recorded in this segment.

This figure significantly exceeds the previous record of ₹22,005 crore set in August 2024, highlighting a sharp surge in foreign participation in Indian debt markets.

The inflows have been driven by a series of regulatory and policy measures introduced by the government and the Reserve Bank of India (RBI).

These include exemptions on capital gains tax for eligible sovereign debt investments and the expansion of securities under the Fully Accessible Route (FAR), which together aim to make Indian bonds more attractive to global investors.

Market participants say these steps have also strengthened expectations that Indian government bonds could be included in Bloomberg Global Aggregate Index, a move that would likely bring in sustained passive foreign inflows.

According to industry experts, RBI measures have reduced concerns over rupee volatility, while tax incentives have improved sentiment among foreign portfolio investors.

DBS Bank officials noted that these developments have encouraged investors to take early positions in Indian debt markets, a trend that may continue unless global geopolitical conditions shift significantly.

The inflows are expected to further support India’s foreign exchange reserves, which stood at $672 billion as of June 12.

Meanwhile, the Indian rupee has also shown signs of recovery, appreciating from a record low of 96.96 per dollar in May to around 94.40 recently.

Bond market indicators have also responded positively. The yield on the 10-year benchmark government bond has fallen by about 20 basis points since the announcement of these policy measures, closing at 6.76% according to CCIL data.

Since bond prices and yields move inversely, this decline reflects stronger demand for government securities.

Experts say improved currency stability has played a key role in attracting investors back to Indian debt markets, with expectations of further inflows towards the end of the year if index inclusion materialises.

However, analysts also caution that despite strong June inflows, global factors such as elevated US Treasury yields could limit the relative attractiveness of Indian bonds in the medium term.