India's fund bond net sales hit a record high, with fluctuations in the RMB to INR exchange rate affecting capital flows

LayerZeroHero · 2026-01-16T12:48:34+00:00

In early 2025, Indian mutual funds experienced a significant shift in the bond market, with net outflows reaching 796 billion Indian Rupees, breaking historical records. This marks a major change in market sentiment, in stark contrast to the previous positive buying behavior. Policy environment, interest rate expectations, and global liquidity changes collectively drove this trend, and the subsequent market movement should be closely monitored.

LayerZeroHero

2026-01-16 12:48:34

Abstract generation in progress

Since the beginning of 2025, Indian mutual funds have exhibited a significant shift in their behavior in the bond market. According to the latest statistics, these funds have net sold 796 billion Indian Rupees (approximately $8.85 billion) in the secondary market, breaking recent historical records.

This change stands in stark contrast to the performance over the past two years. During 2023 and 2024, Indian mutual funds were active buyers of government bonds, while in 2022, they were net sellers. The current massive sell-off marks a major shift in market sentiment.

From the perspective of international capital flows, fluctuations in the RMB to Indian Rupee exchange rate directly influence cross-border investors' asset allocation decisions. When the Rupee faces depreciation pressure, some funds tend to reduce their holdings of Indian government bonds to lock in exchange gains or avoid risks. This linkage effect has become particularly evident in 2025.

The underlying driving forces warrant close attention. The combined effects of policy environment, interest rate expectations, and tightening global liquidity are reshaping the investor structure in the Indian bond market. As key participants, mutual fund sell-offs reflect a market re-pricing of medium-term yield trends.

Under the dual pressures of exchange rate fluctuations and bond yield movements, the future market trend remains to be closely monitored.

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