After New Delhi removed taxes on foreign investors, Indian bonds accessible to
unrestricted global investment drew record inflows. Data from India’s clearing
house show foreigners bought 418 billion rupees (about $4.4bn) via the fully
open channel last month, nearly double the prior record of 239 billion rupees in
Aug 2024. Persistent inflows should lower government borrowing costs and help
support the rupee amid a stronger dollar. ANZ economist Dhiraj Nim said a mix of
the tax cut, currency stability, pushed-out rate-hike expectations and reduced
fiscal risk have encouraged foreign buying, but warned inflows could fade if
global financial conditions tighten and US rates remain high. The flows mark a
rebound after months of weakness; Indian equities outperformed other emerging
markets in June and the rupee was the second-best performing Asian currency that
month.
