Foreigners Sell ₹987 Crore of Indian Government Bonds After Initial Inflows

Foreign portfolio investors sold Indian government bonds worth 987 crore rupees starting in August, marking a reversal of flows that had peaked earlier in the quarter. This net outflow contrasts with robust purchases totaling 49,355 crore rupees in June and July through the Fully Accessible Route (FAR). Several factors contributed to this shift: persistently high global yields, Bloomberg's decision to defer inclusion of Indian debt on key benchmarks, and shortened odds on a US Federal Reserve rate hike. Abhishek Upadhyay, economist at ICICI Securities PD, noted that rising risk-free rates combined with AI-related flows attracting capital elsewhere made it difficult for investors to see inflows amid high crude prices. Many market participants remain waiting on the sidelines before re-entering the market if a rate hike materializes. The US 10-year treasury yield climbed to 4.81%, while Japan's 10-year government bond yield moved above 3% for the first time in recent months. Participants anticipate largely neutral flows in the near future as investors weigh these international conditions against Indian rates.