Overview
- The government and the Reserve Bank of India on June 5 removed capital gains and withholding taxes for eligible foreign bond investments and expanded the Fully Accessible Route to make more sovereign bonds available to overseas buyers.
- Data from the National Securities Depository Ltd show FPIs net bought about $2.2 billion of FAR securities in June, and market-level figures put total sovereign inflows at a record ₹39,640 crore (around $4.2 billion) so far this month.
- The surge in demand has helped push the benchmark 10-year yield down roughly 20–22 basis points to about 6.76–6.77% and has supported a firmer rupee and calmer reserve inflows.
- Bloomberg Index Services has deferred a final decision until mid-2026 but economists estimate that inclusion in the Global Aggregate Index could trigger an estimated $20–$30 billion of passive flows over roughly 10 months if approved.
- Despite the bond buying, foreign investors continue to sell Indian equities and analysts warn that global factors such as US Treasury yields and geopolitical risks will determine whether June’s inflows persist.