Foreign portfolio investment into Indian government securities via the fully accessible route (FAR) has reversed course in March, with investors pulling ₹13,027 crore as of today, according to data from the Clearing Corporation of India Limited (CCIL).
The shift marks a stark contrast to February, when FPIs injected ₹22,615 crore into Indian equities – the largest monthly inflow in 17 months. However, the current outflows bring total FPI withdrawals from India so far in 2026 to over ₹1 lakh crore, according to reporting from The Times of India.
Market participants attribute the change in sentiment to a confluence of factors, primarily a deterioration in global risk appetite. Rising geopolitical tensions in West Asia have driven crude oil prices above $100 per barrel, fueling concerns about imported inflation and a widening of India’s current account deficit. The rupee has too reach under pressure, diminishing returns for foreign investors.
“From an FPI perspective, equities are clearly in negative territory and even on the debt side, the perceived weakness in the rupee is weighing on sentiment. Bonds are not particularly attractive to foreign investors right now,” said a treasury head at a private bank.
Adding to the headwinds, increasing U.S. Treasury yields are making dollar-denominated assets more appealing, prompting a reallocation of capital away from emerging markets like India. Currency volatility, coupled with higher global yields, has reduced the attractiveness of hedged returns on FAR bonds.
Despite the outflows, the Reserve Bank of India (RBI) has intervened through bond purchases and liquidity measures to mitigate the impact on bond yields. Analysts note that these interventions have helped stabilize the sovereign yield curve despite waning foreign demand.
“I don’t witness yield (on the benchmark 10-year government bond) falling sharply below 6.5 per cent, nor do I expect an immediate spike to 7 per cent. At this stage, the market is likely to remain range-bound, with yields broadly moving between 6.55 per cent and 6.75 per cent in the near term,” said a dealer at a private bank.
The Securities and Exchange Commission (SEC) recently adopted final rules related to the Holding Foreign Insiders Accountable (HFIA) Act, requiring directors and officers of foreign private issuers to file reports electronically and in English, effective March 18, 2026. The SEC’s actions, stemming from legislation enacted in December 2025, aim to increase transparency regarding foreign ownership of U.S.-listed companies.
