In December 2025, foreign investors have withdrawn money from Indian government bonds at a record level. Indian sovereign bonds eligible for global bond indices recorded an outflow of about ₹14,300 crore, the largest withdrawal since the launch of the Fully Accessible Route (FAR) in 2020. The biggest reason for this heavy selling was weak rupee, which went to all-time low above 91 against the dollar. This put direct pressure on the returns of foreign investors. Global funds are now shifting towards emerging markets where there is more potential for higher yields and currency appreciation. The effect of this pressure was also visible on bond prices and December showed signs of the biggest decline in the last four months. However, triggers like a possible US–India trade deal in 2026 and global index inclusion could bring a strong comeback in the Indian bond market.
Bond market shaken by weak rupee, but 2026 can become a game changer. Money Live | The weak rupee has shaken the bond market, but 2026 could be a game-changer
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