India's sovereign bonds are set to experience their first monthly outflow since being included in JPMorgan Chase's flagship bond index. Overseas investors have significantly reduced their holdings, with data indicating a decrease of 77.3 billion rupees ($910 million) in investments in Fully Accessible Route (FAR) bonds up to November 28.
The decline in foreign appetite for Indian debt is attributed to concerns over US inflation following Donald Trump's election victory, speculation about increased tariffs and a stronger dollar. The Federal Reserve's indication of maintaining elevated US yields has also contributed to a narrowing yield differential between Indian and US benchmark bonds, which recently fell to 2.39 percentage points, the tightest margin in over a year.