India's index-eligible bonds are seeing their first monthly outflow since April as foreign investors exit swap trades aimed at gaining exposure to the country's $1.3 trillion sovereign debt market.

This shift is part of a broader trend of global funds selling off emerging market debt due to rising US Treasury yields.

A significant portion of the outflows from Indian bonds is attributed to the unwinding of total return swap trades linked to government debt, according to insights from Morgan Stanley and Gama Asset Management.

This development underscores the ongoing challenges faced by India's bond market as it deals with external pressures and changing investor sentiment.