FPIs Sell ₹5,615 Crore of Indian Bonds in October

Foreign portfolio investors (FPIs) were net sellers of Indian government securities for the third month in a row in October 2026, selling ₹5,615 crore amid rising US Treasury yields, a weak rupee and global uncertainty. However, September saw a decline in selling, when foreign investors pulled out ₹10,602 crore from government bonds.

Foreign Investors Continue Selling Indian Government Bonds

FPIs sold government securities worth ₹5,615 crore under the Fully Accessible Route (FAR) in October compared with ₹10,593 crore in September, data from the Clearing Corporation of India (CCIL) showed.

Under the FAR framework, there is no ceiling on investment by overseas investors in eligible Indian government securities.

Under this route, foreign holdings fell to ₹3,56,394 crore as on October 31, lowest in five months.

The selling came after substantial inflows earlier in FY27, particularly in June and July, when foreign investors had increased their exposure to Indian government debt.

Even after three months of selling, cumulative FAR inflows for FY27 remained positive at about ₹43,075 crore.

Why are overseas investors selling Indian bonds?

Indian government bonds have become less attractive due to rising U.S. Treasury yields.

In October, the US 10-year Treasury yield was around 5.25% and India’s benchmark 10-year government bond yield was close to 7.50%.

This reduced the yield premium of Indian bonds.

This is more relevant for a smaller yield differential as foreign investors have to factor in the currency movements while investing in rupee denominated securities.

The Indian rupee also came under pressure. It hit 95.28 to the US dollar before recovering to about 94.95 on October 30.

Currency depreciation can also eat into dollar-denominated returns, even if Indian bonds have higher nominal yields.

High crude oil prices also were a concern. Higher import costs for oil can add to inflationary pressures and affect India’s trade balance.

Bond prices are being weighed down by the RBI rate hike.

The Reserve Bank of India (RBI) moved to a calibrated tightening stance and raised the repo rate by 25 basis points to 5.50% on October 7, 2026.

The move raised expectations of further rate rises.

After a prolonged rally in yields, India’s benchmark 10-year bond yield later rose to around 7.50% in late October.

Bond prices go in the opposite direction of yields. So rising yields can result in mark-to-market losses for investors holding existing securities.

The market is also affected by the government’s borrowing needs.

India plans gross market borrowing of about ₹7.86 lakh crore during October-March FY27, increasing supply of government securities.

Markets and Impact of Persistent FPI Outflows

Foreign selling can also push yields on government bonds higher, especially if the supply is not fully absorbed by demand from other institutional investors.

Higher sovereign yields may impact corporate borrowing costs, the banking sector’s bond portfolios and the valuation of other financial assets.

Outflow in October, however, was nearly 47% lower than the ₹10,593 crore offloaded in September, indicating that the pace of foreign selling has moderated.

The global portfolio rejig was not restricted to the debt market as foreign investors also withdrew ₹34,843 crore from Indian equities in October.

The next few months will depend on US bond yields, crude oil prices, rupee stability and RBI’s policy direction.

The slower pace of selling gives some respite to the bond market for now but foreign investors remain wary of Indian government debt.