According to Clearing Corporation of India Ltd. (CCIL) data, June’s inflows were a significant jump from the net investments of around ₹5,000-5,500 crore recorded in both April and May. It also marked a sharp turnaround from March, when FPIs were net sellers of government securities.
The strong buying has lifted total foreign holdings in government securities under the Fully Accessible Route to ₹3.73 lakh crore. Foreign investors now own around 7.12% of all bonds available under the route.Foreign participation has also become broader across eligible securities. There are now 11 government securities in which foreign ownership exceeds 10%. The highest overseas holding stands at 21.5% in the 7.38% government security maturing in 2027.
The government’s recent decision to remove the 12.5% capital gains tax and the 20% withholding tax on interest for eligible government securities purchased by foreign investors has improved the appeal of these investments. At the same time, the RBI has expanded the list of securities available under the Fully Accessible Route, providing overseas investors with a wider investment universe.
While foreign investors have stepped up purchases in the bond market, their participation in Indian equities has remained relatively subdued. Equity inflows have only begun to recover since the second half of June, highlighting the stronger preference for Indian government bonds in recent weeks.
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