Foreign investors are showing increased interest in Indian debt, resulting in the longest buying streak in almost four years. In June alone, investors have bought $184.5 million worth of Indian debt, which is the third straight monthly purchase. The boosted interest in the country's debt can be attributed to a brightening growth outlook, stable rupee and easing inflation. Additionally, the non-performing loan ratios of local lenders have shown improvement, which is making corporate debt in the country more appealing to investors.
Many analysts have highlighted India's growth prospects and have touted it as the "China story 15-years back". Citigroup, for instance, has displayed Indian opportunities in its global roadshows, while Xavier Baraton, global chief investment officer at HSBC's asset management unit, sees immense potential in the country.
India is also exhibiting faster growth than many major economies worldwide because of robust demand and moderating raw material costs. Foreigners are on track to buy Indian shares for the fifth consecutive month, which has led to key stock gauges hitting record highs.
According to the head of emerging markets strategy at TD Securities, Mitul Kotecha, the trend of foreign purchasing is likely to continue in the second half of the year. With declining inflation improving the real rates of return, rupee stability and volatility reduction, the risk-adjusted return profile for Indian debt is set to improve. Kotecha also cites India's favorable growth prospects and younger population, along with a growing trend towards a "China+1" strategy, as contributing factors to the rise in foreign investment in the country.