Bond investors shun India, citing lack of reassurance from RBI

MUMBAI/ NEW DELHI: Amid all the noise about an increasingly hawkish US Federal Reserve, a trade war and higher oil prices, the Reserve Bank of India’s silence is deafening, say investors piling out of the country’s bonds.

India has seen the largest bond outflows in Asia this year, and investors say the RBI’s laconic communication has added uncertainty in an already challenging environment for emerging markets, especially those countries running current account deficits.

The Indian rupee hit a record low of US$ 69.13 on Friday and has fallen 7 per cent so far in 2018, the most in Asia.

Bond outflows totalled around US$ 6 billion this year, the heaviest in the region, although foreign investment in the debt market is capped at 5.5 per cent of India’s roughly US$ 760 billion of issued debt in the fiscal year ending March 2019.

During emerging market weakness in the last three months, RBI Governor Urjit Patel made only one passing reference to the rupee.

Prompted by a question in a 15-minute news conference following the bank’s decision to raise rates in June, he said the bank was watching the currency’s impact on inflation.

By contrast, many central banks in Asia, from China to the Philippines, have publicly reassured investors that foreign exchange stabi lity was an important policy objective.

The Reserve Bank of India did not respond to a request for comment.