The month of June was the biggest month for inflows so far this year as foreign portfolio investors (FPIs) made a robust comeback to India’s government securities market, investing over USD 2.2 billion through the fully accessible route (FAR). Compared to previous months, when FPI activity was either negative or muted, the strong recovery represents a substantial change. May showed only USD 0.46 billion in inflows, compared to USD 1.25 billion in net outflows in March and USD 0.01 billion in marginal outflows in April. FPI inflows into FAR securities were USD 3.81 billion as of June 25. Nearly 58 per cent of the year’s total investments made through the FAR route came from June inflows, demonstrating the extent of the improvement in foreign investor sentiment. Additionally, it is the largest monthly inflow in the last 15 months. FPIs invested USD 3.34 billion in March 2025, which was the last comparable peak. The comeback came after a number of policy shifts on June 5 that were intended to make Indian government securities more appealing to foreign investors. FPI investments in government securities made on or after April 1, 2026, were excluded from capital gains tax and interest income. Additionally, it added 15-, 30-, and 40-year government bonds as well as Sovereign Green Bonds to the list of FAR-eligible instruments. For foreign investors, the reforms have improved post-tax returns and expanded market access. Significant institutional activity was also observed by market players during the month. One major foreign investor is believed to have invested close to USD 1 billion in government securities with up to ten-year maturities. Analysts claim that the removal of tax barriers and the government’s decision to further liberalize access under the FAR framework has improved the investment case for foreign investors. Foreign investment decisions are increasingly being influenced by variables other than yield differentials, such as India’s macroeconomic stability, policy continuity, ease of market access and favourable post-tax returns, as US Treasury yields continue to be high.
