 "RBI, Reserve Bank of India")
Mumbai: A security personnel stands near the RBI headquarters, in Mumbai, Friday, June 7, 2024. (Photo: PTI)
Foreign banks have emerged as the largest investors, with their investments exceeding the value of net inflows into JP Morgan index-eligible bonds, according to the state of the economy report by the Reserve Bank of India.
The report, however, said the views expressed in the bulletin article are of the authors and do not represent the views of the Reserve Bank of India.
Since June 1 of the current year, foreign portfolio investors (FPIs) have infused Rs 26,251 crore in the debt segment, according to data from the Clearing Corp. of India.
Foreign banks have bought more than $6 billion worth of debt since June 1, while Indian government securities designated under the Fully Accessible Route (FAR) witnessed Rs 23,351 crore worth of inflows in the same period.
Out of 38 bonds under the Fully Accessible Route, only 29 meet the eligibility criteria for the JP Morgan bond index, which requires a face value of over $1 billion and a remaining maturity of more than 2.5 years.
Ahead of the inclusion of Indian sovereign bonds in the JP Morgan index, foreign portfolio investors have increased their ownership of these bonds by over $10 billion, the report highlighted.
Since the official inclusion on June 28, foreign investors have infused Rs 10,641 crore in the debt segment. FAR securities received Rs 8,959 crore in the same period.
The report further mentioned that some of the world’s largest sovereign wealth funds have significantly increased their investments in India. Since their inclusion, investment flows have been muted, and yields have remained almost flat, indicating steady flows in the months ahead rather than volatile surges.
Despite volatility caused by market expectations regarding future monetary policy and fluctuations in the US dollar (DXY), the rupee has been trading within a tight range, resulting in lower currency hedging costs. Reports indicate that the euro is now preferred for funding long rupee carry trades, the report said.
In July and in the current financial year so far, the rupee has depreciated by 0.3 per cent. While in the current calendar year, the local currency has witnessed 0.5 per cent depreciation.
First Published: Jul 18 2024 | 10:26 PM IS