FPIs purchase ₹7,524 crore of debt, highest single day in 7 months

Foreign portfolio investors recorded their highest single-day debt inflow in seven months on January 1, even as they exited FAR securities in December amid rupee weakness

The first day of the year 2026 was positive for the debt market with foreign investors buying a net domestic debt of ₹7,524 crore, the highest single-day inflow since May 29 last year.

 

Foreign portfolio investors pumped ₹29,179 crore into debt on May 29.

 

According to market participants, the inflow may reflect fresh annual allocations or some passive flows entering at the start of the year, adding that the day’s primary auction and overall price action remained weak, suggesting the move is likely a one-off.

 

“It is pentup demand for December, and I do not think it is going to see any continuity,” a market participant said.

 

Foreign investors in December had net bought ₹986 crore while they had net sold ₹4,157 crore in November.

 

This financial year they net bought ₹8,004 crore, according to the National Securities Depository Ltd data.

 

The government on Friday sold 10-year bonds worth ₹32,000 crore.

 

The Reserve Bank of India set the cutoff yield at 6.61 per cent.

 

Foreign investors in December net sold Indian government securities worth ₹12,367 crore designated under the fully accessible route (FAR). This is the highest this financial year against a net buy of ₹4,567 crore in November.

 

Market participants said that foreign investors pulled out of the debt market due to a sharp weakening of the rupee during the month. Additionally, the 25 basis point repo rate cut and liquidity infusion via OMOs did not translate into lower yields due to supply pressure dampening market sentiment.

 

“It had more to do with the dollar-rupee dynamics. Beyond the currency, the environment was not constructive, which raises questions on staying invested on a rupee-adjusted basis. While expectations aroused owing to inclusion in the Bloomberg index are there, it is unclear how soon those expectations will translate into flows,” a senior executive at a primary dealership said.

 

India’s chances of entering the Bloomberg global aggregate index have strengthened after large foreign portfolio investors gave positive feedback on the country’s bond market operations, with an official announcement expected this month.

 

In September, Bloomberg Index Service started seeking investor feedback on whether Indian government securities should be included in the index, a flagship.

 

India is being evaluated for a potential weighting of around 1 per cent in the index, an allocation that could translate into $25 billion of inflows, spread over roughly 10 months, if admitted.