Foreign investors’ purchases of Indian government bonds are expected to remain limited in the near term even after tax relief is introduced, according to SBI Funds. The firm says that while the removal of taxes on overseas purchases of sovereign bonds can improve sentiment, it is unlikely to immediately translate into a sustained rise in foreign flows.
SBI Funds points to several factors affecting investor decisions. It cites the timing of deferred bond index inclusion, which can delay broader participation by benchmark-tracking investors. It also highlights that global bond yields remain elevated, making Indian securities less attractive on a relative basis. In addition, the firm notes that foreign investors still have limited comfort with the rupee.
Across the reports, the emphasis is consistent: tax changes alone are not expected to overcome near-term market and portfolio considerations. The outlets attribute the potential “muted” pace of inflows primarily to index timing, global yield levels, and currency-related risk perception.
