New Delhi, Aug. 8 -- Foreign investment flows into Indian government bonds are likely to remain muted in the near term despite the removal of taxes on overseas purchases of sovereign bonds, as global yields, the domestic interest rate cycle and rupee expectations weigh on investor interest, according to SBI Funds Management.

In its Market Outlook for August 2026, SBI Funds said the deferment of India's inclusion in a global bond index could also limit incremental foreign portfolio investment in Indian bonds.

"With the index inclusion being deferred, one should anticipate muted incremental flows into Indian bonds in the near term from FPI's," the report said.

The report said the tax relief by itself may not be sufficient to substantiall...