Foreign portfolio investors demonstrated cautious optimism toward Indian debt markets in April 2026, investing ₹1,976 crore through the fully accessible route (FAR) for eligible government securities. According to The Economic Times, this marked a significant turnaround from the ₹17,688 crore net sales recorded in March. The FAR pertains to a specialized window introduced by the central bank six years ago, allowing overseas funds to own specified Indian sovereign debt without caps.
Economists attributed the modest inflows to multiple global and domestic challenges affecting foreign appetite for Indian debt. As reported by The Economic Times, elevated real interest rates in advanced economies such as the United States and Japan, a weakening rupee, the risk of higher domestic interest rates, and mounting concerns over fiscal slippage have all combined to temper foreign investment. Dhiraj Nim, economist and FX strategist at ANZ Bank, noted that outflows could continue intermittently due to higher oil prices' impact on India's macroeconomic outlook.
International bond markets experienced significant pressure, with the 10-year Japanese government bond yield reaching a 29-year high of 2.52% on Thursday due to rising oil prices, according to Reuters. The 10-year US bond yield was up at 4.41%, creating unfavorable conditions for emerging market investments. A senior fixed income trader at a foreign bank explained that the yield differential between India and US or Japan is causing many FPIs to move out of emerging markets like India and invest in those bonds, especially at these rates.
The Indian rupee fell to a fresh record low of 95.33 against the dollar on Thursday, as reported by The Economic Times, triggered by a sharp rise in crude oil prices. Higher oil prices have intensified concerns over India's fiscal position, given the country's heavy dependence on energy imports. Economists do not expect any meaningful inflows into Indian bonds in the near term, with substantial inflows likely only if a significant catalyst emerges, such as the inclusion of Indian sovereign debt in a major global benchmark index like the Bloomberg Aggregate Bond Index.
