Comment on Indian Rupee Bonds

India’s central bank has decided to allow foreign investments into domestic bonds with less than three years maturities. Wontae Kim, Research Analyst at the Legg Mason affiliate Western Asset Management, comments:

“The recent decision by the Reserve Bank of India is great as it will allow foreign investors to modify their exposure to India Rupee Bonds without concerns about losing their quota limit. As investors can now invest in local bond with less than three years maturity it will allow for a more tactical positioning, particularly in short duration bonds.

India is an attractive market for fixed income investors not only for its carry, but also because of how much fundamentals have improved over the past five years. Inflation was in double digits until moderating to current levels of just over four per cent. Foreign Exchange reserves have grown to one of the highest globally enabling the country to better address external shocks. Emerging markets are currently facing some headwinds, but when market sentiment turns, India is well positioned to benefit from the rotation.”