By Sourashis Banerjee

Copyright thehindubusinessline

Relentless selling by foreign portfolio investors in Indian equity is widely reported. But they have net purchased debt instruments amounting to ₹50,215 crore so far in 2025, helping reduce the total outflows for this year. Global bond funds investing through the Fully Accessible Route (FAR) have been the largest buyers of Indian debt.

Foreign portfolio investors have pulled out ₹1,38,580 crore from Indian equity market and ₹1,442 crore from REITs and InvITs so far in 2025. But their net purchase of debt has helped reduce the total outflow to ₹88,318 crore in 2025.

According to Sachin Sawrikar, managing partner, Artha Bharat Investment Managers, the strong inflows into Indian debts is “largely driven by India’s inclusion in global bond indices like JP Morgan’s creating structural demand for government securities.” He thinks that “attractive real interest rates, recent sovereign rating outlook upgrades and the expected US Fed rate cuts are making carry trades into India appealing.”

FAR emerges as the leader

The FPI debt inflows have been mostly routed through the FAR route in 2025. The RBI had introduced the Fully Accessible Route (FAR) in 2020 wherein foreign investors could invest in government securities without any investment ceiling or restriction. This was one of the requirements for including Indian government securities in global bond indices. Most of the investment from global bond funds flows through this route.

“Debt inflows through the FAR route have been a stable segment of foreign portfolio inflows particularly since the inclusion of Indian debt in major global indices like JP Morgan and Bloomberg EM indexes,” says VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.

The FAR route witnessed massive investments in February and March 2025, while the General Limit was volatile. This bullish start was interrupted by a sharp reversal from April to June, where all three debt components, General Limit, VRR (Voluntary Retention Route), and FAR, registered net outflows, aligning with peak equity selling pressures. However, from July to September, a recovery took hold. Over ₹24,000 crore has been received through the FAR route since July 2025.

Positive macros

The relatively stronger macros of the Indian economy also act in Indian bonds’ favour, say experts.

“India’s economy has been performing relatively better as compared to other major economies. Recently, the Organisation for Economic Cooperation and Development (OECD) revised India’s GDP growth for FY26 to 6.7 per cent from 6.3 per cent. Indian Sovereign Rating was upgraded to BBB by S&P recently,” says Abhishek Bisen, Head – Fixed Income at Kotak Mutual Fund.

“The recent GST rationalisation is expected to boost consumer demand, and likely to have positive impact on inflation, while the central government is intended to uphold the path to fiscal consolidation with fiscal deficit as a percentage of GDP at 4.40 per cent in FY26. This strong macro and spike in g-sec yields in last few months makes Indian bond market attractive vis-à-vis peers. Indian markets have experienced FPI outflows on equity side in the last few months, however, debt inflows continue via the FAR route where FPIs have been increasing their exposure in Indian government bonds, due to their attractiveness, despite a relatively underperforming rupee . Overall this is a positive development for India story,” adds Bisen.

Published on September 24, 2025