FAR Inflows Surge Near ₹35,000 Cr After RBI Move; Equities Suffer Massive Capital Outflow

FAR Inflows Surge Near ₹35,000 Cr After RBI Move; Equities Suffer Massive Capital Outflow​

The market is witnessing a significant divergence in foreign investor behavior. While the equity segment continues to grapple with heavy outflows, the debt market is seeing a major revival of foreign appetite. The Fully Accessible Route (FAR) for Indian government securities (G-secs) has become a strong attraction point for international investors.

Foreign portfolio investors have poured nearly Rs 35,335 crore into FAR securities this year. This influx highlights the growing preference among global capital managers for stable debt instruments in India. The positive sentiment is directly linked to measures announced by the Reserve Bank of India (RBI).

RBI's FAR Expansion Fuels Debt Inflows​

The renewed interest in Indian government bonds followed an announcement from the Monetary Policy Committee (MPC) meeting. The RBI expanded the FAR universe, which now includes ultra-long tenor bonds. This measure was explicitly designed to attract greater foreign capital into the domestic market.

Market participants have responded positively to this structural shift. Data from NSDL indicates that June registered the highest inflows through the FAR so far this year, reaching Rs 20,722 crore as of June 24. This figure accounts for more than 60 percent of the total annual inflows via the route.

These robust flows mark a strong rebound following periods of risk aversion seen earlier in the year. Amit Pabari, managing director at CR Forex Advisors, noted that "Alongside the (MPC) rate decision, the RBI's measures built to pull foreign money into India are actually starting to show results."

Equity Segment Under Pressure Amid Outflows​

In stark contrast to the surge in debt flows, the equity segment remains heavily strained. Foreign investors have pulled out nearly Rs 2.8 lakh crore from Indian equities since the beginning of the year. Much of this substantial capital flight occurred during March.

The global risk-off sentiment triggered by the conflict in West Asia prompted heavy divestment in March. During that month alone, nearly Rs 1.8 lakh crore worth of outflows were recorded in the equity market.

While the pace of equity outflows has moderated in recent months, the segment continues to bear the brunt of prevailing global risks. This places a significant divergence between the stability offered by debt and the volatility faced by equities.

Debt Route Performance Versus Other Investment Channels​

The success of the FAR is particularly notable when compared against other debt investment channels. As of June 24, net inflows through the general debt route stood at Rs 13,014 crore. In contrast, flows under the Voluntary Retention Route (VRR) were modest during the first six months, registering just Rs 64 crore.

Foreign investors are increasingly directing their capital through these specialized routes in response to RBI's strategic moves. The strong focus on FAR suggests a targeted strategy by international funds looking for secure returns within the Indian sovereign debt structure.