India bonds still a ‘buy’ for foreign investors despite post-election policy uncertainty

MUMBAI : India’s government bonds will continue to intention foreign flows even as a narrower-than-expected victory margin for High Minister Narendra Modi-led alliance would perhaps suggested a shift in policy, fund managers acknowledged.

Foreign investors trust piled on bonds this year and remained on the having a peer for aspect on Tuesday, despite the sudden election result hitting shares, bonds and the rupee on concerns over populist spending and a stalling of reforms.

“The knee-jerk response of increased yields and a few currency weak point would perhaps indeed be a impartial searching opportunity so that that you must add threat,” Kenneth Akintewe, head of Asian sovereign debt at abrdn, acknowledged.

In spite of a threat of more populist insurance policies, the fiscal “starting up level is a ways stronger than expected” and the election outcomes close now not close great to derail the positive outlook for bonds, Akintewe acknowledged.

Expectations of a burst of populist spending rapidly after the elections would perhaps also very properly be unfounded, Adarsh Sinha, co-head, Asia FX & rates intention at Monetary institution of The usa, acknowledged.

“For the federal government, what’s going to be the inducement to splurge after the election within the intention term?”

India’s fiscal deficit for the present monetary year can trust to resolve round 5 per cent of GDP against a budget target of 5.1 per cent, Sinha acknowledged, pegging the benchmark 10-year bond yield to ease to 7 per cent by the tip of 2024.

Query from in a single other nation investors and prolonged-term domestic customers had pushed bond yields down till Monday. Indian bonds are furthermore place apart of abode to be added to JPMorgan’s rising market debt index later this month, which can trust to abet stabilise yields.

Monetary institution of The usa’s Sinha expects passive inflows of $21 billion into Indian bonds till March 2025.

“No topic doable intention-term outflows, India’s prolonged-term enhance trajectory remains compelling, which is liable to intention inflows into government bonds over the medium term,” Manish Bhargava, a fund supervisor at Straits Funding Administration, acknowledged.