By\u00a0Shashank Nayar\u00a0 Foreign portfolio investors (FPIs) turned net buyers of Indian bonds in March, probably anticipating a more dovish central bank policy accompanied by a rate cut. The bond markets are expecting added liquidity to be infused by the Reserve Bank of India (RBI) through forex swaps. FPIs have bought close to $3 billion worth of bonds from the Indian bond markets in March \u2014 the highest in a month since October 2017. Dealers believe the rise in foreign fund flows in the debt market can be attributed to an expectation of further rate cuts by RBI on account of easing inflation numbers, easing FPI norms through the voluntary retention route (VRR),introduced in March, and the dollar swaps. \u201cAttractive spreads in short-term corporate bonds and added liquidity infused within the system through the RBI swap window have led foreign investors to look at India as an attractive investment,\u201d said Devang Shah, deputy head, fixed income, Axis Mutual Fund. The (VRR) scheme to boost foreign investment in the Indian debt markets by the central bank was finalised on March 1, making investments through the route free of regulatory norms applicable to FPI investments in debt markets, provided investors maintain a minimum share of their investments for a fixed period. \u201cGlobal bond yields are going down while emerging markets (EM) currencies have been performing well, leading to inflows in EM markets,\u201d said Dhawal Dalal, CIO, fixed-income, Edelweiss Asset Management, adding: \u201cVRR so far has collected `11,000 crore of the corporate bond limit.\u201d The RBI on February 8 relaxed rules for FPI holding of corporate bonds by withdrawing its April 2018 regulation wherein no FPI was allowed an exposure of more than 20% of its corporate bond portfolio to a single corporate. The benchmark 10-year yield \u2014 7.17% yielding paper maturing in 2028 \u2014 fell 7 basis points (bps) in March, to close at 7.48% at the end of March. The rupee appreciated by 2.3% to close at `69.16 on March 29. The quota for FPI investment in gilts is `2.34 lakh crore as on 2 April, 2019, according to CCIL data; the utilisation as on April 2, was 65.63% for gilts. The NSDL data shows that as of April 1, the limit for FPI investments in corporate bonds is `3.03 lakh crore. The utilised level is 72.39%. FPIs invest in various debt market instruments such as government bonds (G-secs), state development loans and corporate bonds, but with prescribed limits and restrictions by the central bank.