New Delhi
Indian bond markets are showing resilience, supported by stable macroeconomic fundamentals and favorable demand-supply dynamics, Puneet Pal said on Monday, Head of Fixed Income at PGIM India Mutual Fund. He believes that Indian bonds are an attractive investment option, bolstered by high real interest rates that suggest potential room for rate cuts, especially following recent reductions by the Federal Reserve.
Pal anticipates that the Reserve Bank of India (RBI) may also consider rate cuts in the near future. The benchmark 10-year bond yield is expected to decline towards 6.50% by the fourth quarter of 2025, with long bond yields projected to drift lower in the coming quarters. For medium to long-term investors, Dynamic Bond Funds focusing on sovereign holdings present a compelling risk-reward scenario.
Despite geopolitical tensions in the Middle East, the Indian bond market remained steady last week, with the benchmark 10-year bond yield closing at 6.79%, unchanged from the previous week. Crude oil prices have dropped nearly 7%, and while hopes for an imminent RBI rate cut have lessened, inflation remains a concern, with the Consumer Price Index (CPI) reaching a nine-month high of 5.49%.
On a positive note, India’s trade deficit narrowed to $20.80 billion in September from $29.70 billion in August, driven by a decrease in non-oil imports. The taxpayer base in India has also seen significant growth, with direct tax collections in FY24 reaching Rs.19.6 lakh crore, an increase of 182% since FY15.
