Foreign Portfolio Investors (FPIs) have significantly increased their exposure to Indian debt markets in March 2025, even as they continued to offload equities aggressively, depository data revealed. This surge in FPI inflows into debt markets this month has more than doubled from ₹10,517 crore in February, surpassing January’s ₹571 crore. The increased investment in Indian debt markets is attributed to India’s recent inclusion in the Bloomberg Index and the rate cut by the Reserve Bank of India (RBI) in February.
Mahendra Jajoo, Chief Investment Officer-Fixed Income at Mirae Asset Investment Managers, expressed caution in interpreting this surge as a trend reversal. He emphasized the need to observe if this trend sustains in the upcoming months of April and May. Jajoo highlighted that the current interest differential between US G-sec and Indian government securities may not be very attractive for FPIs, leading them to explore opportunities in other countries like Brazil and Mexico that offer higher yields.
Despite the record ₹1.65 lakh crore FPI investment in Indian debt in 2024 following India’s inclusion in JP Morgan’s bond index, 2025 commenced on a less robust note as FPIs shifted their focus to safer US assets amidst the “Trump trade.” The ongoing uncertainty in global markets, including a stronger US dollar and rising US bond yields, has tempered FPI interest in Indian debt markets, despite recent positive developments.
### Expert Insights and Market Trends
V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, pointed out that FPIs have sold ₹30,015 crore worth of Indian equities thus far in March. While the selling trend persists, the intensity has slightly subsided as valuations in the market become more reasonable. Notably, a significant portion of the outflows from India has shifted towards Chinese stocks, which have exhibited strong performance in 2025.
### Future Outlook and Projections
Looking ahead, the trajectory of FPI flows into Indian markets remains uncertain. The global economic landscape, marked by the ongoing trade war and evolving geopolitical dynamics, may influence investment patterns in the coming months. While a weaker dollar could limit flows into the US, heightened uncertainty might drive investors towards safe-haven assets such as gold and the dollar.
In conclusion, the recent surge in FPI inflows into Indian debt markets amidst continued equity offloading underscores the complex interplay of global factors shaping investment decisions. As market dynamics evolve and geopolitical tensions persist, investors and analysts alike are closely monitoring developments to gauge the trajectory of FPI flows and their implications for the Indian financial landscape.
This year, we are not expecting any significant influx of FPI funds into Indian markets, given the prevailing global economic conditions and the relative attractiveness of other investment destinations. However, the resilience of the Indian domestic story and the fundamental strength of the economy continue to underpin investor confidence in the long-term growth prospects of the country’s financial markets.
