The Indian debt market had attracted a whopping $2.65 billion net inflow from Foreign Portfolio Investors (FPIs) on Wednesday. This is the highest ever inflow seen on a single day. In the past, there were only two occasions on which the FPI inflows have breached $1 billion on a single day. They were on September 16 in 2008 and January 14 in 2011 when the inflows were $1.9 billion and $1 billion respectively.

Record inflows

Year to date inflows in to debt has also touched record levels in this calendar; with net inflow of $16 billion so far this year. The year 2010 was the previous best where an inflow of $10 billion was seen. Last year there was a net outflow of about $8 billion.

Foreign investors seem happy with the stability in the Indian rupee and the sharp improvement in the current account deficit. Further with talks about hike in interest rates in UK and US, bond prices there could head lower, making Indian debt more attractive.

Rupee insulated

Surprisingly, the rupee was unfazed despite the strong $2.65 billion inflow on Wednesday. The Indian rupee opened weak on that day at 60.84 and strengthened slightly by about 0.1 per cent to close the day at 60.62. The currency remained stable on the next day, Thursday as well. Rupee which gained some ground today seems to be losing momentum. It has started to weaken again after hitting an intraday high of 60.38. It is currently at 60.52.

FPI flows into debt have not been helping the rupee over the last three months. Rupee recorded a high of 58.33 in the third week of May. Since then, the debt segment has attracted a net inflow of $10 billion. The Indian rupee has however depreciated from 58.33 to 61.73 in early August.

Equity segment

The FPI inflows into the equity segment are moving almost in tandem with the previous year. The year-to-date inflow into equities this year is $12.68 billion. The inflow in the corresponding period last year was $12.35 billion.

Related Topics