India economic growth prospects fuel foreign bond-buying streak

FOREIGN investors are snapping up Indian debt for the best buying streak in almost four years as the South Asia nation sees better growth prospects and economic stability.

Foreigners have bought US$184.5 million worth of Indian debt in June so far, the third straight monthly purchase and the longest run since August 2019, according to data compiled by Bloomberg.

Easing inflation, a brightening growth outlook and a stable rupee are all helping to burnish the appeal of Indian bonds. The non-performing loan ratios of local lenders is also improving, increasing the attractiveness of corporate debt.

Many analysts are singing the praises of the country’s growth prospects. Citigroup has recently showcased Indian opportunities in its global roadshows, while Xavier Baraton, global chief investment officer at HSBC’s asset management unit, calls it “the China story 15-years back.”

Robust demand and moderating raw material costs are helping India grow faster than most major economies in the world. Key stock gauges have jumped to all-time highs with foreigners on course to scoop up Indian shares for a fifth straight month.

“Clearly India’s favourable growth prospects, relatively younger population, as well as increasing trend towards a China+1 strategy has helped to attract investment into India overall,” says Mitul Kotecha, head of emerging markets strategy at TD Securities.

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Kotecha sees the trend of foreign purchasing sustaining in the second half of the year. Declining inflation is improving the real rates backdrop, while rupee stability and reduced volatility will improve the risk adjusted return profile for Indian debt, he said. BLOOMBERG