Invesco Remains Bullish on Indian Debt Despite Index Inclusion Delay
MUMBAI – Invesco, one of the world’s leading asset management firms with $2.45 trillion in global assets, is maintaining a positive outlook on Indian government bonds. Despite a recent setback regarding their inclusion in a flagship Bloomberg index, the firm continues to favor long-duration debt, citing India’s resilient fiscal landscape.
Norbert Ling, Head of Fixed Income Portfolio Management for Asia Pacific at Invesco, highlighted that India’s yield curve provides a compelling case for investors. “The yield curve remains reasonably steep, offering more attractive carry and roll-down opportunities versus the front end,” Ling noted in an email to Reuters.
Strategic Appeal of Long-Term Bonds
Market data supports this sentiment, with the benchmark 10-year government bond yielding approximately 6.87%, while 5-year bonds hover around 6.49%. For investors looking further out, 30-year securities offer yields between 7.45% and 7.55%.
According to Ling, Invesco is adopting a selective approach, preferring targeted exposure over a broad-based increase across the yield curve. He noted that Indian debt currently presents better value propositions compared to many of its Asian peers. This optimism is shared by the broader market; since June, foreign investors have poured nearly $7 billion into Indian debt, specifically targeting securities under the Fully Accessible Route (FAR), which imposes no foreign investment limits.
A Temporary Setback for Index Inclusion
The market had eagerly anticipated the inclusion of Indian bonds into the Bloomberg Global Aggregate Index, a move seen as a significant stamp of approval for the country’s bond market. However, on July 31, Bloomberg announced a delay, stating that recent market reforms—while significant—required more time to be effectively integrated into the market’s day-to-day operations.
Despite this, Invesco views the deferral as a minor hurdle. “Recent reforms have materially reduced barriers for foreign investors and brought India closer to the standards required for inclusion,” Ling said. He remains confident that eventual inclusion is on the horizon, which would serve to further diversify India’s foreign investor base.
Structural Growth vs. Tactical Trades
Invesco believes that the current wave of capital inflows is fundamentally different from previous cycles. Rather than speculative or tactical trading, these investments are being driven by structural reforms, such as the elimination of withholding and capital gains taxes for foreign investors and the expanded pool of FAR-eligible bonds.
Ling expects that any future index-related inflows will likely be concentrated in highly liquid benchmark bonds and longer-duration segments. This structural shift is expected to provide sustained support for the market, solidifying the long-term potential for those looking to invest in Indian government bonds. As India continues to align its financial markets with global standards, the country is increasingly viewed as a durable destination for international institutional capital.
