Foreign investors sharply increased their purchases of Indian government bonds last week, signalling renewed confidence in the rupee after the Reserve Bank of India (RBI) intervened aggressively to stabilise the currency.
According to Clearing Corporation of India data, global funds bought Rs 55.51 billion (USD 631 million) worth of debt accessible to foreign investors last week a 46 times jump from Rs 1.21 billion in the previous week. The rupee surged nearly 1 per cent last Wednesday after the RBI stepped in to counter speculative pressure.
Bloomberg reported that the central bank views the rupee as being under speculative attack and is prepared to intervene further to anchor it at a stronger level. The RBI’s actions have helped lift the rupee from near-record lows and made Indian government securities more attractive to foreign investors.
Yields on the benchmark 10-year bond remain around 6.5 per cent among the highest in Asia — boosting the relative appeal of Indian debt. Rupee-denominated bonds have delivered 1.9 per cent returns to investors so far in October, far outperforming the broader Bloomberg emerging-market local debt index, which has returned just 0.2 per cent.
The rupee gained the most in four months during the week ended Friday as the central bank intervened across both onshore and offshore markets. This narrowed the rupee’s year-to-date losses to 2.6 per cent against the dollar, though it remains Asia’s second-worst performer after the Indonesian rupiah.
Bond market sentiment is also improving as easing inflation and the possibility of monetary easing lend fresh support. The 10-year yield has eased seven basis points so far in October after rising 25 basis points in the previous quarter, indicating stabilising expectations as investors return to Indian debt amid hopes of continued currency strength and steady policy support.
