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Day after Modi was re-elected, foreign funds bought Indian bonds

Modi’s re-election put to rest any uncertainty about a diverse group of political parties coming to power at a time when growth is already slowing.

business Updated: May 28, 2019 09:17 IST
Kartik Goyal and Ragini Saxena
Kartik Goyal and Ragini Saxena
Bloomberg
Modi,Indian bonds,foreign funds
Global investors piled a net $216.3 million into Indian bonds on Friday, the day after Prime Minister Narendra Modi’s sweeping election victory.(AFP File Photo)

Global investors piled a net $216.3 million into Indian bonds on Friday, the day after Prime Minister Narendra Modi’s sweeping election victory.

The second-biggest daily inflow in two months turned foreign funds into net buyers of rupee-denominated notes for May, signalling the debt’s appeal may be rising as wagers grow that the Reserve Bank of India will soon add to its two interest-rate cuts this year.

Modi’s re-election put to rest any uncertainty about a diverse group of political parties coming to power at a time when growth is already slowing. The benchmark 10-year yield slipped as much as seven basis points to reach 7.16% on Monday, the lowest since April 2018, with traders citing overseas demand as a reason for the rally in bonds.

Also read| ‘Indian statistical system needs to be revamped, modernised’: Niti Aayog

Foreign funds “have no choice but to look at India now,” said Lakshmi Iyer, chief investment officer for debt at Kotak Mahindra Asset Management Co. “If your forwards are bearable and yields are high, that is when they make a nice and attractive carry,” she said.

The yield could touch 7% if the RBI’s June policy is positive for bonds, she said.

Also read| Fiscal deficit may see upward revision in Budget from 3.4% to beat slowdown

First Published: May 28, 2019 09:15 IST