Foreign inflows into Indian government securities have begun to slow following a strong June increase tied to index inclusion hopes. Narrowing yield spreads with the US and concerns about the rupee are key factors behind the shift.
Investors are reassessing rupee-denominated assets as the appeal of high-yielding Indian bonds diminishes. The moderation comes after a surge in June driven by expectations around Bloomberg index inclusion.
Yield spreads between India and the US have narrowed, reducing the relative attraction for overseas buyers. Additional worries include potential rupee weakness and delays in index decisions.
The Reserve Bank of India continues to monitor these capital flows amid the changing market conditions.
