FII inflows in the debt market are returning on account of stability observed in foreign exchange and interest rates, according to market experts.
Foreign institutional investors (FIIs) were gross buyers of debt securities worth Rs 30,266 crore and sellers of bonds to the tune of Rs 11,450 crore till January 24, resulting in a net inflow of Rs 18,816 crore (USD 3.05 billion), according to data from the Securities and Exchange Board of India.
In addition, FIIs bought a net Rs 3,473 crore (USD 563 million) in the equity market in this period, taking their total investment in debt and stocks to about Rs 22,289 crore (USD 3.61 billion).
In 2013, overseas investors withdrew a net Rs 50,847 crore (USD 8 billion) from the bond market and infused a net Rs 1.13 lakh crore (USD 20.10 billion) in equities.
They started pulling out from the Indian debt market after the US Federal Reserve indicated in May that it would taper its stimulus programme, raising concerns that funds available for investing in emerging markets may be reduced.
The Fed subsequently decided to start reducing its bond purchases by USD 10 billion to USD 75 billion from this month.
The rupee, which touched an all-time low of 68.85 in August, has recovered and closed at 62.66 against the dollar on Friday.
The Reserve Bank of India kept its key interest rate unchanged at the mid-quarter monetary policy review on December 18.
There were 1,724 registered FIIs in the country and 6,354 sub-accounts as of January 24.