FPI single-day inflows into debt segment hit 1-year high: NSDL data

As prospects of another interest rate cut by the Reserve Bank of India brightening with soften inflation print, foreign portfolio investment in the debt segment hit highest in almost an year on a single day, with investors pumping in Rs 3,052 crore on Wednesday, according to National Securities Depository Limited (NSDL) data. FPI inflows in debt in March so far was Rs 8497 crore, highest since August 2024.

 

On April 1, 2024, foreign investors had purchased Rs. 4,723 crore worth of domestic securities.

 

Moreover, total foreign portfolio investment in Indian government securities designated under the Fully Accessible Route (FAR) reached Rs. 2.96 trillion as of Thursday, approaching the Rs. 3 trillion, according to data by Clearing Corporation of India (CCIL) data. FPI inflows in FAR securities hit Rs 2 trillion in July, 2024.

 

“Policy Rate cuts by Reserve Bank of India are getting certain. One rate cut in April is priced in. The market is also expecting another rate cut in June,” said the treasury head at a private bank while explaining the renewed investor appetite in bonds.

 

RBI has cut the policy repo rate in February – first in almost five years.

 

Headline CPI inflation declined to a seven-month low of 3.6 per cent in February 2025 from 4.3 per cent in January, raising hope for another rate cut in the April policy review meeting.

 

“The way the market rallied today (Thursday) was unexpected, and we might see FAR securities investment surpass Rs. 3 trillion soon as these flows will sustain,” he added.

 

The yield on the benchmark 10-year government bond softened by 3 basis points on Thursday to settle at 6.63 per cent, against previous close of 6.66 per cent. FAR segment witnessed net inflow worth Rs. 2760 crore on Thursday.

 

Investment in FAR securities had surpassed Rs. 1 trillion on October 16, 2023. Later, FPI investment more than doubled, exceeding Rs. 2 trillion by July 2024, just nine months after JP Morgan's announcement of including Indian debt in its index. In September 2023, JP Morgan announced that it would include government bonds issued by the RBI under the Fully Accessible Route in its widely followed GBI-EM index.

 

The inflows also allowed the central bank to buy dollars on Thursday, which capped rupee’s gains, dealers said. 

 

The local currency appreciated upto 86.20 per dollar during the day on the back of foreign inflows. It settled at 86.37 per dollar, against the previous close of 86.44 per dollar.

 

“The RBI absorbed the flows,” said the treasury head at another private bank. “The US Federal reserve maintained its dot plot, and they expect two rate cuts in the year, which has given confidence to the market, both the rupee and debt segment,” he added.

 

The domestic currency appreciated for the consecutive seventh trading session, logging its longest winning streak since May 2024.

 

The rupee has appreciated by 1.32 per cent in March so far. It witnessed 3.44 per cent depreciation in the current financial year. In the current calendar year, it has depreciated by 0.88 per cent.