With the latest inflow, total investment in debt markets has reached over Rs 1.24 lakh crore ($19 billion) this year.
"FPI investments in debt have been robust for the last few months. While the run-up to the monetary policy saw some tepid flows, as investors remained cautious in the event of a no rate cut stance by RBI; FPI flows picked up right after the the 25 bps rate cut on August 2," siad Vidya Bala, head of MF research at FundsIndia.com.
Markets regulator Sebi (Securities and Exchange Board of India) had in early July increased the FPI limit in central government securities, which provided a longer rope for them to pump in money.
"With the spread between US 10-year bond and 10-year India gilts at a good 4.2 percentage points even now, FPIs continue to seek opportunities in the Indian debt market with the rupee-dollar equation stable," she added.
Echoing similar views, Alok Agarwala, senior vice-president and head investment analytics at Bajaj Capital, said: "Indian real policy rates as well as real treasury yields remain the highest among major economies except probably Brazil and Russia. Besides, a stable currency gives an added incentive to foreign investors."
The RBI in its latest monetary policy statement accepted downside risks to growth and inflation hinting that their next action will be data dependent.
Mr Agarwala said data is unlikely to improve in the very short term as the temporary adverse impact of GST implementation on growth is visible in the contraction in manufacturing and service sectors for July.
"In this scenario, Indian treasuries seem an attractive choice for FPIs. The Indian G-Sec yield curve is pretty steep (and hence attractive for term spread plays) barring the benchmark 10-year bond," he added.