Indian Bonds Attract Global Investors After RBI’s Rupee Defence

Global investors are returning to Indian government bonds as the Reserve Bank of India’s (RBI) decisive defence of the rupee boosts market sentiment, as per Bloomberg reports. Foreign funds purchased ₹55.51 billion (US$631 million) of bonds last week, a sharp rise from ₹1.21 billion in the previous week, according to Clearing Corporation of India Ltd. data. 

The surge comes after the RBI’s currency intervention helped the rupee rebound nearly 1% last Wednesday.

RBI’s Intervention Revives Investor Confidence

The RBI has been actively intervening in both onshore and offshore markets to counter speculative attacks on the rupee. These actions have lifted the currency from near-record lows and bolstered investor confidence in rupee-denominated assets. The 10-year benchmark yield stands around 6.5%, among the highest in Asia, making Indian bonds an attractive proposition for global investors seeking high-yield opportunities.

Portfolio managers note that with stable or appreciating rupee expectations, India’s high-carry debt offers strong potential returns compared with other emerging markets. As a result, Indian bonds have returned 1.9% so far in October, outperforming the 0.2% gain seen in the broader Bloomberg emerging-market debt index.

Rupee Recovery Supports Bond Momentum

The rupee recorded its strongest five-day gain in four months last week, trimming its year-to-date losses against the dollar to 2.6%. Despite remaining one of Asia’s weaker currencies, the RBI’s measures have improved market stability. Analysts highlight that a firm rupee alongside easing inflation and prospects of monetary policy support could sustain the rally in Indian debt.

Yields on the benchmark 10-year bond have eased seven basis points this month after rising 25 basis points in the September quarter, signalling renewed optimism in fixed income markets.

Read More:Indian Companies Raise ₹5.47 Trillion via Bonds in H1FY26!

Conclusion

The RBI’s robust defence of the rupee has revived global investor appetite for Indian government bonds. As yields remain attractive and the currency shows resilience, India’s debt market continues to outperform peers across emerging economies, although future gains may depend on sustained policy support and stable external conditions.

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