Overseas investors have pumped in nearly Rs 5,000 crore into the country's debt markets in the last four trading sessions, primarily due to increase in the limit on foreign ownership of bonds.
However, in view of higher stock valuations, foreign portfolio investors (FPIs) pulled out more than Rs 550 crore from equities during this period.
According to latest depository data, FPIs invested a net sum of Rs 4,886 crore (USD 747 million) in debt markets during October 3-6.
This comes following a net inflow of Rs 1.4 lakh crore in last eight months from February-September 2017. Prior to that, they withdrew more than Rs 2,300 crore.
"FPIs have been pouring money in debt in search of better yields and falling interest rate expectations on back of high inflation and reduced rates and this will increase bond prices and give them much needed capital appreciation," Dinesh Rohira, CEO at 5nance.com, said.
According to Anshul Saigal, portfolio manager and head- PMS at Kotak Mutual Fund said Indian real policy rates, and real treasury yields, continue to be the highest among major economies barring Brazil and Russia.
Further, he is of the view that a stable currency gives an added incentive to foreign investors to invest money in debt markets.
Markets regulator Sebi last week increased the FPI limit in central government securities which provided a longer rope for them to pump in money, he added.
It raised FPI investment limit of such securities to Rs 1,89,700 crore from Rs 1,87,700 crore.
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