If the current government comes back to power, there will be massive FPI inflows into the debt market – ..

Mumbai: If a BJP-led government is formed at the Centre, India’s debt market is likely to see inflows of $1-2 billion per week by foreign portfolio investors (FPIs) till June 28, Nomura said. Indian government bonds will be included in JPMorgan’s emerging market debt index on June 28.
If the BJP fails to win the elections, there could be withdrawals of $30 billion from foreign investors in a matter of weeks. In such a scenario, the proposed pressure on the rupee may require extensive intervention by the Reserve Bank of India.
The RBI has recently started increasing the level of foreign exchange reserves after the sale in April.
RBI’s intervention in the forex market in the coming weeks will depend on the election results.
FPIs have made a net investment of Rs 7,400 crore in Indian bonds so far in May, after net sales of Rs 11,200 crore in April 2024.
This flow is due to the inclusion of Indian government bonds in JP Morgan’s debt index from end-June.
Inflows into Indian government bonds are expected to be around $30 billion in the current fiscal year. Apart from JP Morgan, there is a proposal to include Indian securities in the Bloomberg Emerging Market Index.