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I understand how a rise in interest rate might lead to an inflow of capital into debt securities, however wouldnt these Foreign Portfolio Investments (FPI) remove their funds from equity. And for Foreign Direct Investments (FDI), why will they invest into corporations in the country if these companies have higher cost of borrowing and face lesser demand due to higher rates which will increase cost of bowwing of consumers as well? So accounting for all these components, how will total capital inflow increase with rising interest rates?

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