Mumbai: A mini-revival of foreign inflows into Indian bonds spluttered in the first week of September.

Global funds sold $686.4 million of rupee-denominated debt in the week ended 7 September, the most in four months. That’s also more than the combined $460 million of inflows in July and August.

“Right now we can’t say that we have reached the end, and volatility and tension around flows in EM are likely to remain elevated," said Manu George, director of fixed income in Singapore at Schroder Investment Management Ltd., which oversees $582 billion. The sell-off in the rupee and negative sentiment toward emerging markets “continues to weaken investor interest."

What started as a prolonged slump in India’s bonds has now escalated into a broader crisis for the government, as rising oil prices worsen the nation’s twin deficits and pummel the rupee. The currency has been testing new lows almost every day and declined as much as 1.3% on Monday.

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