According to market experts, FII inflows into debt are returning on account of the stability observed in foreign exchange and interest rates.
Foreign institutional investors were gross buyers of debt securities worth Rs. 21,210 crore and sellers of bonds to the tune of Rs.10,219 crore till February 21, resulting in a net inflow of Rs. 10,991 crore ($1.77 billion), according to data from the Securities and Exchange Board of India.
During this period, FIIs pulled out Rs. 549 crore from the equity market.
In 2013, overseas investors withdrew Rs. 50,847 crore ($8 billion) from the bond market and infused Rs. 1.13 lakh crore ($20.1 billion) in equities.
They started pulling out from the Indian debt market after the US Federal Reserve first indicated in May that it would taper its stimulus programme, raising concerns that funds available for investing in emerging markets may be reduced.
The Fed subsequently started reducing its bond purchases in January. The rupee, which touched an all-time low of 68.85 in August, has recovered and closed at 62.12 against the dollar on Friday.
As of February 21, there were 1,726 registered FIIs in the country and 6,367 sub-accounts.