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Foreign investors are returning to India's sovereign bonds, particularly those eligible for global index inclusion, as local debt rises amid expectations of increased liquidity from the central bank. In just four days this month, global funds invested 64.72 billion rupees ($764 million) in Fully Accessible Route bonds, surpassing November's outflow of 51.87 billion rupees, marking a significant rebound since India's inclusion in JPMorgan Chase's index in June.
India's sovereign bonds are facing their first monthly outflow since joining JPMorgan's bond index, with overseas investors cutting holdings of Fully Accessible Route bonds by 77.3 billion rupees ($910 million) as of November 28. This decline follows a narrowing yield differential with US Treasuries, which dropped to 2.39 percentage points, the smallest gap in over a year, amid rising US inflation speculation and elevated yields due to the Federal Reserve's stance on interest rates.

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