A compelling reason for foreign investors to consider India’s debt market is the relatively high-interest rates they offer. The Reserve Bank of India has maintained a policy of maintaining a positive interest rate to curb inflation. This outcome of this policy has resulted in attractive yields for debt instruments, making them an alluring option for investors who prioritize higher returns compared to first-world nations, which offer comparatively lower interest rates.
Foreign Portfolio Investors have infused about Rs 12,400 crore into the Indian debt markets in November 2023, making it the highest inflow in more than two years on attractive yields offered by the country's debt.
"Return on Investment (RoI) stands as a pivotal Key Performance Indicator (KPI) for organizations. In this context, a meticulous analysis of capital expenditures, human resources, and various other factors is imperative," Marc Spiegel, Vice President, Robertshaw.
This positive inflation policy has invited global investors like Pacific Investment Management Company (PIMCO) to build their portfolios with high-yield instruments, which is unfound in developed economies.
It is proven that investors/ institutions that diversify their investments can get out of economic downfalls with little repercussions. This belief has been cemented ever since the 2007-2008 crisis, which resulted in the fall of the world’s fourth-largest bank. India’s Debt market provides an excellent opportunity for diversification and allows investors and institutional fund managers to balance their portfolios with assets that are not impacted by economic downturns of their home nations.
Adding Indian debt to securities to their portfolio, investors can enhance diversification and potentially increase overall returns, all while maintaining a low level of risk. Institutional investors like the Singapore Sovereign Wealth Fund and the Government of Singapore Investment Corporation (GIC) are beneficiaries of this investment tactic.
Fidelity International, a global investment management company, actively diversifies its portfolio by including Indian debt instruments. The rationale lies in the diversification benefits that exposure to emerging markets can bring.
