Foreign investors are increasingly turning their attention to Indian government bonds, even as they continue to pull money out of the country’s stock market. The shift comes ahead of India’s anticipated inclusion in the Bloomberg Global Aggregate Bond Index, a move that market experts believe could unlock billions of dollars in fresh foreign capital over the next few years. The growing appetite for Indian debt highlights a major change in investor sentiment as global market dynamics evolve.
According to data from India’s National Securities Depository Limited (NSDL), foreign investors have purchased $7.7 billion worth of Indian debt so far in 2026, already surpassing the $6.6 billion recorded for the whole of 2025. A significant portion of that inflow—about $5.8 billion—arrived in June alone after the Indian government removed taxes on overseas investors purchasing government bonds. Analysts say the tax reforms have made Indian bonds more attractive and strengthened the country’s chances of joining the Bloomberg Global Aggregate Bond Index in early 2027.
While bonds are enjoying strong demand, Indian equities are experiencing the opposite trend. Foreign investors have sold approximately $27.6 billion worth of Indian stocks this year, as global investors increasingly chase opportunities linked to the artificial intelligence boom and other high-growth sectors around the world. The sharp contrast between bond inflows and equity outflows reflects a cautious approach by investors who are seeking stability and predictable returns amid global market uncertainty.
Financial experts believe India’s eventual inclusion in the Bloomberg index could generate between $25 billion and $27 billion in foreign inflows by the 2028 financial year. Recent policy changes, including the expansion of India’s Fully Accessible Route (FAR) to include longer-term government securities, are also expected to attract large institutional investors such as pension funds and insurance companies. Market participants describe the tax exemption for foreign bond investors as a transformative step that reduces costs and improves access to India’s debt market.
The growing bond inflows could provide much-needed support for India’s economy and currency. With the country facing pressure from capital outflows, higher oil import costs, and a widening balance of payments deficit, fresh foreign investment into government bonds may help stabilize the rupee and strengthen financial reserves. Bloomberg has also introduced new electronic trading tools for Indian government bonds, making it easier for international investors to participate in the market. As India positions itself as a stronger player in global fixed-income markets, investor interest in its bond sector appears set to grow even further.
source: cnbc
