Foreign investors sell ₹9,192 crore of Indian FAR bonds as global risks rise

Foreign portfolio investors turned net sellers of Indian government bonds under the fully accessible route in September, withdrawing ₹9,192 crore. The outflow ends a five-month stretch of net purchases that saw foreign investors add roughly ₹60,332 crore between April and August, with a modest net buy of ₹203 crore in August. Earlier strong buying was driven by a June ordinance that exempted foreign investors from tax on interest and capital gains, as well as the Reserve Bank of India's expansion of the FAR basket to include new 15-, 30- and 40-year issues.

However, the September sell-off reflects broader risk-off sentiment caused by Brent crude staying above $105 a barrel, higher US Treasury yields and escalating Middle-East tensions. Treasury heads note that while the tax changes improved Indian bonds' appeal, they cannot fully counteract the global risk environment. The potential inclusion of Indian bonds in the Bloomberg Global Aggregate Index, now deferred, had also supported demand but its postponement further dampened sentiment.