FPI Investments in FAR Securities rise over 10% following inclusion in JP Morgan Index

Foreign portfolio investor (FPI) investments in Fully Accessible Route (FAR) securities reached ₹2.30 lakh crore as of August 31, marking an 11.62% increase from ₹2.06 lakh crore on July 31, according to the Clearing Corporation of India (CCIL). This steady rise comes after Indian bonds were added to the JP Morgan index.

Mataprasad Pandey, Vice-President of Arete Capital Service, noted that the expectation of the US Federal Reserve cutting rates could widen spreads as U.S. Treasury yields are likely to fall more than Indian government bond yields. Such wider spreads might drive capital flows between markets.

On June 28, JP Morgan included 29 Indian government securities under FAR in its emerging market index, giving India a 1% weight in the index. This weight is set to increase incrementally each month until March 2025. The FAR framework allows foreign investors to buy specified Indian government bonds without any investment limits. The announcement by JPMorgan Chase & Co on September 22, 2023, to add Indian government bonds to its JPMorgan Government Bond Index-Emerging Markets, sparked increased interest from foreign investors.

In recent months, particularly from February to May, FPI investments in FAR securities experienced volatility due to global and domestic uncertainties. Investment growth in March and May was notably lower compared to the initial period following the inclusion announcement. Between October and January, FPI investments in FAR securities rose by around ₹10,000 crore to ₹12,000 crore.

However, in June, investments started to gain momentum after election results in India, as market experts suggested improved investor confidence due to the ruling party retaining power.

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