Why are global investors pouring billions into Indian bonds? The answer lies in an upcoming rate cut and soaring confidence!
A Surge in Foreign Investment
Foreign ownership of India’s global index bonds has crossed 3 trillion rupees ($35 billion) for the first time, as investors rush to buy ahead of an expected interest rate cut in April. This marks a significant milestone, with overseas holdings doubling in just 14 months.
Why the Rush?
The Reserve Bank of India (RBI) is likely to cut rates on April 9, following a reduction in February. Lower rates mean bond prices rise, offering capital gains to investors. Sabrina Jacobs of Pictet Asset Management notes that “aggressive rate cuts, stable inflation, and a steady currency” are key reasons for the surge.
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Which Bonds Are Hot?
The two-year and eight-year bonds are the most popular, with foreign ownership at 15.3% and 14.7%, respectively. These bonds fall under the Fully Accessible Route (FAR), which allows unlimited foreign investment—a big draw for global funds.
A Strong Finish to the Fiscal Year
Foreign investors ramped up purchases of Indian bonds in March, buying ₹124 billion worth in the last two weeks alone—a sharp jump from ₹40 billion earlier in the month.
The surge comes as India’s retail inflation hit a seven-month low of 3.61% in February, strengthening expectations of rate cuts.
Experts, including Manish Bhargava, CEO of Straits Investment Management, predict the RBI could slash rates by 50-75 basis points this year.
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