Why Foreign Money Loves Indian Debt, Not Stocks
7/7/202611 min
Foreign capital is back in India — but not the way it used to be. In June, overseas funds poured a record Rs 41,773 crore into Indian government debt, even as they pulled nearly Rs 49,340 crore out of equities. What's driving this split? A stabilising rupee, tax breaks on bond returns, and hopes that India will finally enter Bloomberg's global bond index. But risks remain — a hawkish Fed, a deferred index decision, or weak Q1 earnings could change everything fast. ET's Rozebud Gonsalves breaks down what this debt-versus-equity divide really means for India's markets and the rupee.
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First 90 secondsAnirban Chaudhuri· Host0:00
[upbeat music] For years, foreign capital has been fleeing India. Now it's pouring into Indian debt, but staying away from equity. Why is this happening? Let's break down the players first. FBIs or foreign portfolio investors are overseas funds and institutions that invest in Indian markets, either in equities, which means stocks, or in debt, which basically means government and corporate bonds. Think of debt investment as lending money to India and earning interest versus equity investment, which is buying a piece of a company and betting on its growth. Now, in June, FBIs poured in a record forty-one thousand seven hundred and seventy-three crore rupees into Indian debt, specifically bonds under something called the Fully Accessible Route or FAR. That's a category of Indian government bonds that foreign investors can buy without the usual investment caps. At the same time, they pulled out nearly forty-nine thousand three hundred and forty crore rupees from Indian equities. So like I said, debt is booming, equities are bleeding. Why? Three reasons. First, the rupee. Our currency had fallen to record lows