Foreign portfolio investor (FPI) flows into government securities under the fully accessible route (FAR) turned negative in March 2026, reversing the inflow trend seen earlier this year as global risk sentiment weakened.
“From an FPI perspective, equities are clearly in negative territory, and even on the debt side, the perceived weakness in the rupee is weighing on sentiment. As a result, bonds are not particularly attractive to foreign investors right now,” said the treasury head at a private bank.
At the same time, rising US Treasury yields made emerging market debt less attractive, leading to a shift in global capital away from markets such as India. Traders said currency volatility, along with higher global yields, reduced the appeal of hedged returns on FAR bonds.
Despite the outflows, the impact on bond yields remained limited due to the Reserve Bank of India’s intervention through bond purchases and liquidity measures. Analysts said these steps helped keep the sovereign yield curve stable even as foreign demand weakened.
“I do not see yields (on the benchmark 10-year government bond) falling sharply below 6.50 per cent, nor do I expect an immediate spike to 7 per cent. At this stage, the market is likely to remain range-bound, with yields broadly moving between 6.55 per cent and 6.75 per cent in the near term,” said a dealer at a private bank.
