Rupee bonds likely to outperform US and other developed markets
Foreign investors in local markets have historically factored in the rupee's depreciation versus the US dollar, but stronger macroeconomic fundamentals, sweeping improvements in market infrastructure, and formidable central bank reserves have started to reverse that template, a top DBS Bank executive said.
«Vis-a-vis, the rest of the world, the earlier story of a regular rupee depreciation will start to dissipate. While we are going to be a function of global markets, the rupee bonds will actually outperform the US and the rest of the developed markets,» Ashhish Vaidya, head, treasury & markets, DBS Bank, told ET.
Over the past year, the rupee has displayed considerable resilience versus the dollar despite expectations of the Federal Reserve keeping rates higher for longer, giving a global boost to the American currency. In 2023, the rupee depreciated 0.8% against the dollar while volatility in the currency plunged to multi-year lows, even as other regional peers witnessed swings. So far in 2024, the local currency has shed 0.4% versus the dollar.
Besides better domestic inflation management and the impact of the upcoming inclusion of Indian sovereign debt in global bond indices, Vaidya cited developments in technology as a key driver of overseas interest.
«The entire tech stack of Indian financial markets — which the RBI and other players have facilitated — is a phenomenal one. From a liquidity sense, we will be one of the foremost markets to provide liquidity to investors for entry and exit at a reasonable
