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2025-08-01 17:36:42
Amidst market uncertainty, why are foreign giants bucking the trend and betting big on Indian bonds? ⑴ Despite heightened market uncertainty in July, foreign banks bucked the trend and increased their holdings of Indian government bonds. ⑵ Data shows that these banks purchased a net 114 billion rupees, or approximately $1.3 billion, of Indian government bonds in July. ⑶ Although trading volume was impacted by uncertainty, average daily trading volume fell to its lowest point since November last year, at just 451 billion rupees. ⑷ The contrarian approach of foreign banks may be related to some institutions' expectations that the Reserve Bank of India will cut interest rates in August. ⑸ Previous data showed that India's retail inflation hit a six-year low in June, and the market generally expects inflation to fall further in July, providing the Reserve Bank of India with ample room to cut interest rates. ⑹ Several institutions, including Citigroup and DBS Bank, predict that the Reserve Bank of India may cut interest rates by 25 basis points next week. ⑺ This move suggests that the market is divided on the future direction of the Indian economy, with some investors already positioning themselves in advance, betting on loose monetary policy. ⑻ Despite the sluggish trading volume, this huge bet by foreign capital has undoubtedly injected an unusual signal into the market.
