Resurgence of India rate-cut wagers revives foreign investor interest in bonds

Time of India

25-07-2025

Foreign appetite for
Indian government bonds
is back, with inflows picking up steadily over the last month, as investors gauge fresh expectations of a rate cut by the
Reserve Bank of India
as early as August.
The RBI cut rates by a larger-than-expected 50 basis points in June and changed the stance to "neutral", prompting investors to bet on a prolonged pause.
Explore courses from Top Institutes in
Please select course:
Select a Course Category
PGDM
Data Science
Public Policy
Management
Product Management
Project Management
CXO
Digital Marketing
Data Analytics
Leadership
Others
healthcare
Design Thinking
Artificial Intelligence
others
Finance
MBA
Cybersecurity
MCA
Technology
Degree
Data Science
Healthcare
Skills you'll gain:
Financial Analysis & Decision Making
Quantitative & Analytical Skills
Organizational Management & Leadership
Innovation & Entrepreneurship
Duration:
24 Months
IMI Delhi
Post Graduate Diploma in Management (Online)
Starts on
Sep 1, 2024
Get Details
by Taboola
by Taboola
Sponsored Links
Sponsored Links
Promoted Links
Promoted Links
You May Like
Gold Is Surging in 2025 — Smart Traders Are Already In
IC Markets
Learn More
Undo
But a sharp drop in June retail inflation has some investors reassessing the likelihood of another rate cut.
Bonds Corner
Powered By
Resurgence of India rate-cut wagers revives foreign investor interest in bonds
Foreign investors are showing renewed interest in Indian government bonds, driven by expectations of an upcoming rate cut by the Reserve Bank of India as early as August. Subdued inflation and persistent growth concerns are fueling these expectations. Over the past month, foreign investors have net purchased 129 billion rupees in Indian bonds.
Three Indian infra investment trusts eye $500 million debt in coming weeks, sources say
Grip Invest launches auto compounding investment product for bond investors
Despite RBI's rate cuts, Indian G-Sec yields remain range-bound due to US yield pressures, says Rajkumar Subramanian
US Treasury pullback from long-term bonds signals policy divergence, says Vishal Goenka
Browse all Bonds News with
The RBI could implement a modest 25 basis point cut in August if inflation remains subdued and growth concerns persist, said Singapore-based Manish Bhargava, CEO of Straits Investment Management, adding that
bond yields
are attractive at current levels.
Over the last one month, foreign investors have net bought 129 billion rupees ($1.5 billion) of Indian bonds linked to global indexes after selling more than 330 billion rupees in the first two-and-a-half months of the financial year that started on April 1, clearing house data showed.
Live Events
Analysts said concerns on the growth front are also likely to prompt the central bank to lower rates further.
With recent high-frequency data disappointing and indicating the possibility of a further slowdown in growth, "there is potential for more support from the RBI further down the line," said London-based Giulia Pellegrini, lead portfolio manager, emerging market debt at AllianzGI.
India's overall economic fundamentals remain solid, keeping the country on investors' radar, she said.
A wider gap between interest rates in India and the U.S. would add to the appeal of Indian debt, investors said.
That's why a Federal Reserve rate cut could act as a positive catalyst for Indian bonds, as they have historically helped local currency debt markets, said Nigel Foo, Singapore-based head of Asian fixed income at First Sentier Investors.
However, current Indian bond yields are lower than where they were in the past at similar policy rate levels, and so are relatively unattractive, he added.
The 10-year U.S. yield was around 4.35%, with the Fed expected to cut rates by at least 50 bps in 2025. The Indian 10-year benchmark bond yield was at 6.30%.
"India's local debt story remains very compelling on both FX and rates," said Jean‑Charles Sambor, head of emerging markets debt at TT International Asset Management in London, who expects bond yields to decline through this year and next, and finds the middle of the yield curve attractive.
($1 = 86.2470 Indian rupees)