There could be a modest increase in growth this year on anticipation of further reforms from the government, lower inflation, political stability at the center and recovery in the US and Europe. Last year growth targets fell short due to a tight monetary policy and paralysis in decision making but it seems to be receding now.
News like passing of the Companies and Banking bill are good for the industry and for foreigners.
The Indian fixed income securities markets have also been on a roll since 2012 as foreign institutional investors (FII) have bought a record Rs 45,000cr worth of bonds.
There are many reasons as to why the Indian debt is fancied by FIIs. Many central banks and sovereign wealth funds have preferred the local Indian currency debt since diversification and the interest rate cycle seem to be peaking and rate cuts could start this year by the RBI. Even with the adjustment of currency risk, it makes sense for foreigner’s to invest in Indian debt markets. Moreover, the government has increased the total limit for investments by FIIs, meaning that they can invest $20 billion in corporate bonds, $25 billion in infrastructure bonds and $20 billion in government bonds. The drop in the value of the rupee by 3% was another reason for the investments. Any appreciation in the currency works in their favor and is included and calculated for in the overall returns. Indian high net worth investors can still invest in dynamic bond funds of various mutual funds for smart gains with a perspective time horizon of 12 months.