Foreign Portfolio Investors purchase Rs 5,200 crore FAR bonds in a week

Mumbai: Foreign Portfolio Investors (FPIS) purchased Rs 5,200 crore ($627 million) fully accessible route (FAR) bonds in a week. Earlier, select Indian government securities were included in JPMorgan global bond index.

According to the Clearing Corporation of India data, on Monday, foreign investors bought Rs 1,625 crore FAR bonds while on Tuesday, these securities witnessed outflow of Rs 92 crore. Following that, foreigners invested Rs 397 crore on Wednesday and Rs 1,227 crore on Thursday. FPIs invested  Rs 428 crore in FAR bonds on Friday.

‘Foreign investors have already made significant investments in eligible government securities in the run-up to the inclusion. Going forward, investments by foreign portfolio investors in FAR securities will gradually increase every month,’ Sujit Kumar, chief economist, National Bank of Financing Infrastructure and Development said.

Index-eligible bonds have attracted $10 billion from overseas investors since the inclusion was announced in September. Overseas investors held a total of Rs 1.9 trillion FAR bonds as of July 5.

Also Read: Know how to delete your WhatsApp account 

Bond yields have marginally moderated over the past couple of months due to increased inflows. The 10-year yield traded in the range of 6.90%-7.03% in June, compared with 6.97%-7.14% in May. On Friday, yields on the benchmark 10-year bond closed at 6.99%.

JPMorgan Chase & Co announced in September last year that it would add Indian government bonds to its benchmark Global Bond Index Emerging Markets Index (GBI-EM) from June 28.

Currently, India carries 1% weight in the index, with planned incremental increases each month till March 2025. Securities included in global bond indices do not have any foreign investment limit. As the weight of Indian securities rises gradually in the index, the domestic bond market is likely to attract nearly $30-billion inflows over the next 10 months.

Foreign institutional investors (FII) or Foreign portfolio investors (FPI) are those who invest in the financial assets of a country while not being part of it. On the other hand, Domestic Institutional Investors (DII) are those who invest in the country they are living in. Both types of investors can impact the economy’s net investment flows.