Foreign portfolio investors (FPIs) increased their investments in government securities under the Fully Accessible Route (FAR) by nearly ₹8,000 crore in the first week of November, amid a strengthening rupee and easing bond yields.
FPI holdings in FAR government securities rose to ₹3.65 lakh crore on November 9 from ₹3.57 lakh crore on November 2, an increase of around ₹7,969 crore, according to data compiled by PTI from the Clearing Corporation of India (CCIL).
During the same period, the Indian rupee appreciated from 94.90 on November 2 to 93.74 against the US dollar on Monday. Meanwhile, the yield on the 10-year benchmark government security eased to 7.178% from 7.315% over the same period.
The rupee’s recovery was supported by softer crude oil prices, stronger foreign fund inflows and hopes of easing tensions in West Asia.
Brent crude, which had traded above $105 per barrel before the US mid-term results, eased to $96.41 per barrel on Monday.
Additionally, a rally in global artificial intelligence-related stocks improved investor sentiment, encouraging foreign investors to return to Indian equities.
The combination of stronger capital inflows and lower crude oil prices helped ease pressure on the domestic currency.
An appreciating rupee improves dollar-denominated returns for overseas investors, while a decline in bond yields generates mark-to-market gains on existing bond holdings, potentially enhancing the attractiveness of Indian government securities.
The increase in FAR holdings also comes against the backdrop of foreign investors selling Indian government bonds in recent months, amid concerns over global interest rates, currency volatility and uncertainty surrounding India’s inclusion in global bond indices.
Earlier, FPI investment in Indian government securities under FAR had dropped by ₹17,054.22 crore over three months, amid changing global yield dynamics and rising currency risks.
Foreign investors pulled out ₹5,615.21 crore in October, ₹10,592.89 crore in September and ₹846.11 crore in August, CCIL data showed.
FPI investments in FAR G-Secs rise nearly ₹8,000 crore as rupee gains, bond yields ease