Global Funds Resume Purchases of Indian Bonds as Limits Increase

  • Relatively higher yields attracting foreigners: Edelweiss
  • Rupee debt sees biggest three-day inflow since October

Global holdings of rupee-denominated debt are rising after limits on foreign ownership of the securities increased this month.

Indian notes took in 36.5 billion rupees ($546 million) in the three days through Monday, the biggest such increase since October, according to data from the National Securities Depository Ltd. That’s caused holdings to rise a net 24.1 billion in January after falling 97.2 billion rupees in the previous two months. The nation granted overseas investors access to an additional 165 billion rupees of sovereign and state-government bonds from Jan. 1, part of a September plan to allow a phased increase in their ownership.

Local-currency sovereign debt has returned 8.5 percent in the past year, the most in Asia, Bloomberg Indexes tracking major regional markets show. The yield on India’s 10-year government notes declined for a second year in 2015, as sliding Brent crude prices helped slow consumer inflation and improve public finances in the net oil-importing nation. The securities still pay 7.76 percent, the highest in the region after Indonesia. The yield rose
one basis point Tuesday.

“Foreigners are attracted by India’s relatively high yields and the prospects of faster economic growth,” said Ajay Manglunia, Mumbai-based head of fixed income at Edelweiss Financial Services Ltd. “India offers a picture of stability amid all the emerging-market turmoil.”

Inflation Data

Pacific Investment Management Co. and PineBridge Investments are among funds who said over the past month that they plan to increase holdings of Indian sovereign debt as the nation’s limited exposure to China also makes investors bullish.

The rupee is among the better-performing currencies in Asia this month as the turmoil in Chinese financial markets damped sentiment toward emerging markets. It fell 0.1 percent to close at 66.87 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg.

India will release data on consumer-price inflation for December and industrial production for November after the close of markets on Tuesday.

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