Foreign portfolio investors (FPIs) increased their investments in government securities under the Fully Accessible Route (FAR) by nearly Rs 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 Rs 3.65 lakh crore on November 9 from Rs 3.57 lakh crore on November 2, an increase of around Rs 7,968.782 crore, according to the data compiled by PTI from 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 today, while the yield on the 10-year benchmark government security eased by nearly 0.14 per cent to 7.178 per cent on Monday from 7.315 per cent on November 2.
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 oil, which traded over USD 105 per barrel before the US mid-term results, eased to USD 96.41 per barrel on Monday.
Additionally, a rally in global artificial intelligence-related stocks also improved investor sentiment, encouraging foreign investors to return to Indian equities.
The combination of stronger capital inflows and lower crude oil prices eased 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 improving the attractiveness of Indian government securities.
The increase in FAR holdings also comes against the backdrop of foreign investors selling 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 dropped sharply by Rs 17,054.216 crore in three months, due to changing global yield dynamics and rising currency risk.
Foreign investors pulled back Rs 5,615.212 crore in October, Rs 10,592.894 crore in September, and Rs 846.11 crore in August, the CCIL data showed.
