Foreign inflows into Indian government bonds may decline in 2025 after a record high in 2024. The spike in 2024 was due to the debt being added to JPMorgan’s emerging market debt index.
Wei Li, head of multi-asset investments at BNP Paribas SA, said, “Foreign inflows in 2025 will remain strong but may not match 2024 levels.”
In 2024, overseas investors bought 1.24 trillion rupees ($14.5 billion) worth of Indian bonds under the fully accessible route. This route allows unrestricted foreign investment, and most bonds under it are now part of JPMorgan’s index.
Li highlighted that inflation, policy adjustments, and global market changes could impact capital flows. “Investors should stay cautious and closely watch market dynamics,” Li added.
Rate cuts in India are expected to begin in February 2025, but investors worry the easing cycle may be limited. Meanwhile, the Federal Reserve has already indicated fewer rate cuts for 2025.
Interest rate trajectories in India and the US, along with rupee movements, will heavily influence bond inflows.
