Foreign Portfolio Investors (FPIs) have significantly increased their exposure to Indian debt markets, investing ₹23,703 crore in the first half of March 2025, even as they continued to offload equities aggressively, depository data showed.
FPI inflows into debt markets this month have more than doubled from ₹10,517 crore in February and far exceeded January’s ₹571 crore, likely driven by India’s Bloomberg Index inclusion and the RBI’s February rate cut.
Experts believe it’s too soon to call a trend reversal, as a stronger US dollar and rising US bond yields in January 2025 dampened FPIs’ interest in Indian debt despite the bond inclusion story.
Mahendra Jajoo, Chief Investment Officer-Fixed Income, Mirae Asset Investment Managers, said he does not attach any high importance to the recovery of FPI flows in Indian debt markets in March 2025. “We have to see if this trend sustains in April and May. At this point, I don’t see a trend reversal. I don’t expect this to sustain, and I think flows will be moderate to low”, Jajoo told businessline.
He noted there is some “sympathy flow” from FPIs into Indian debt markets in March following the rate cut by RBI. ”I don’t expect any big flows into India from FPIs in the current year because there is so much opportunity outside in the globe on the fixed-income side. Countries like Brazil and Mexico are providing far higher yields”, Jajoo said.
“This year we are not expecting any big flows into India from FPIs on account of index inclusion. The Bloomberg Index inclusion in January this year had a small effect of $3-5 billion”, he said.
FPI flows into India will come, but it will not be significant this year. The current interest differential between US G-sec and Indian government securities is not very attractive for FPIs, he said. Jajoo however added that Indian domestic story is intact and strong.
FPIs poured a record ₹1.65 lakh crore into Indian debt in 2024, driven by India’s inclusion in JP Morgan’s bond index. However, 2025 began on a weak note as they shifted to safer US assets amid the “Trump trade,” experts said.
Equity selling continues
FPIs have offloaded ₹30,015 crore in Indian equities so far this month (up to March 13). V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that while selling continues, its intensity is easing as valuations turn more reasonable.
Much of the outflows from India have moved into Chinese stocks, which have outperformed in 2025. Meanwhile, a weaker dollar may limit US-bound flows, but heightened uncertainty from the ongoing trade war could drive more investment into safe-haven assets like gold and the dollar, he added.
