Foreign Investors Pour Record Money Into Indian Debt
Foreign investors bought a record amount of Indian government bonds in June, driven by recent tax changes, improved market sentiment and hopes of India’s inclusion in a major global bond index.
Foreign Investors Buy Indian Government Bonds
Foreign investors purchased nearly $3 billion worth of Indian government bonds under the Fully Accessible Route in June, marking their highest monthly inflow into this segment. The buying was significantly higher than the combined net inflow of around $1.7 billion seen between January and May.
The sharp increase reflects stronger global appetite for Indian sovereign debt after recent policy measures made the market more attractive for overseas investors.
India Bond Tax Breaks Boost Inflows
The surge followed India’s decision to exempt foreign investors from the 12.5% long-term capital gains tax on government bonds. New Delhi also scrapped the 20% withholding tax on bond interest income.
The Reserve Bank of India further expanded the pool of securities eligible under the Fully Accessible Route by including longer-dated sovereign debt. These measures reduced tax and access-related barriers for foreign investors.
Global Bond Index Inclusion Hopes
India’s recent reforms have strengthened expectations of inclusion in the Bloomberg Global Aggregate Bond Index. Such an inclusion could bring more passive foreign flows into Indian debt markets.
Lower crude oil prices also supported sentiment toward Indian bonds, easing concerns over inflation and external balances. Foreign investor interest was not limited to government bonds, as treasury bills also saw strong buying during the month.
