Analysts believe the recent return of FPIs is influenced by softer GDP growth data and the upcoming RBI monetary policy decision.

Looking ahead, inflows into Indian markets are projected to rise in 2025, particularly with India's inclusion in the Bloomberg Emerging Market Local Currency Government Index set for January 31, 2025.

This phased inclusion will assign Indian government bonds a 10% weight in the index over ten months, completing by March 31, 2025.

Since the inclusion of domestic government bonds in JP Morgan indices on June 28, 2024, FAR securities have attracted a total net inflow of Rs 56,498 crore.

Of the 38 bonds eligible under the FAR, only 27 meet the JP Morgan index criteria, which include a face value of over $1 billion and a remaining maturity of more than 2.5 years.

In November 2024, foreign portfolio investors (FPIs) made a net infusion of Rs 876 crore into India's domestic debt segment, following the first net outflow from Fully Accessible Route (FAR) securities since April.

As of early December 2024, FPIs have significantly returned to India's debt and equity markets, net purchasing Rs 7,908 crore in government securities under the FAR.

Additionally, FPIs have ramped up their equity investments, injecting nearly Rs 24,500 crore into Indian stocks during the first four trading sessions of December, including a substantial Rs 8,540 crore on December 5 alone.

The Reserve Bank of India's monetary policy review is set for December 6, 2024, with expectations that interest rates will remain unchanged due to persistent high retail inflation amid slowing GDP growth.

India's economic growth rate has slowed to 5.4% in the second quarter of FY25, yet a repo rate cut is anticipated in February 2025 as inflation remains elevated.

The decline in inflows during November was largely attributed to rising US Treasury yields and a stronger dollar, which shifted investor focus towards US equities.

During this period, equity outflows were significant, totaling approximately Rs 91,983 crore in October and Rs 18,259 crore in November.