India Bond Returns Are the Best in Asia as Covid Cases Drop

An Indian 10 rupee banknote and a U.S. one-hundred dollar banknote are arranged for a photograph. (Photographer: Dhiraj Singh/Bloomberg)

India Bond Returns Are the Best in Asia as Covid Cases Drop


India’s dollar bonds have rallied to become the best performers in major Asian credit markets this month after lagging in April, as new coronavirus cases in the pandemic-battered country drop by about half from a peak.

  • The notes have returned 0.8% so far this month, the most in the region, according to a Bloomberg Barclays index; Indian bonds had gained 0.4% in the previous month, the lowest rate except for China
  • India is preparing another stimulus package for sectors hit hardest by the second Covid-19 wave, people familiar with the matter have said. That may add more legs to the outperformance of Indian credit
India Bond Returns Are the Best in Asia as Covid Cases Drop
  • The world’s second-most populous country recorded 208,921 new coronavirus cases Wednesday. That compared with a record 414,188 cases on May 7
  • “We find select opportunities in bonds that are pricing in pessimistic or downside scenarios in Indian investment grade, with valuations that are attractive despite very robust standalone performance,” said Neeraj Seth, head of Asia credit at BlackRock Inc.
  • Goldman Sachs Group Inc. put India’s investment-grade dollar bonds back among its favored sectors within Asian BBB debt earlier this month. Analysts including Kenneth Ho cited their expectations of a sharp rebound in economic activity from the third quarter as well as under-performance against regional peers in recent months as reasons for their bullishness
  • But uncertainties still abound for India investors as the pandemic remains deadly and vaccine shortages complicate easing of restrictions in the nation’s economy. Automakers with plants in Tamil Nadu are suspending operations and reducing shifts as employees threaten to go on strike due to health concerns

Primary Market -- Slow Sales

  • Indian firms haven’t been as active in the bond market in recent months as companies assess their borrowing plans amid the fallout of the coronavirus wave. JSW Hydro Energy is the sole dollar bond issuer since late March. In stark contrast, companies sold a record $12.7 billion of notes in the first quarter
  • Similarly, local firms have issued 618.3 billion rupees ($8.5 billion) of Indian currency notes so far in this quarter, after selling a near-record 2.9 trillion rupees in the previous three months
  • Meanwhile, in the dollar loan market, Oyo Hotels, one of India’s most valuable startups, is offering unusually generous terms to investors as it seeks to raise $600 million in debt, as fresh restrictions undercut its recovery plans

Secondary Market -- Short-term Rupee Debt Costs Drop

  • Average yield on top-rated rupee corporate bonds maturing in two years have dropped 98 basis points so far this month to 4.52%, Bloomberg-compiled data show. If the month ends at that level, the slide would be the most since 2009
  • The fall in yields comes after India’s central bank earlier this month assured the markets of its support to the economy and pledged to inject 500 billion rupees of liquidity
  • Meanwhile, dollar bonds from metals and mining, chemicals and transportation services sectors are among the best performing this month while those from the retail sector are among the worst, according to an index of Indian bonds

Distressed Debt -- Personal Bankruptcy

  • India’s top court last week allowed personal bankruptcy cases to resume against individuals including tycoons who were once among the country’s richest people
  • Lenders last year filed bankruptcy cases against businessmen including Reliance Group’s Anil Ambani, Dewan Housing Finance Corp.’s Kapil Wadhawan and Bhushan Power & Steel Ltd.’s Sanjay Singal. The cases were halted earlier
  • India’s insolvency appeals court put on hold on Tuesday a lower court’s order that had asked lenders to consider an offer made by Dewan Housing’s founder Wadhawan to settle the dues and close bankruptcy case. The lower court’s order had come after Piramal Enterprises Ltd. emerged the winning bidder, according to people familiar with the matter, for the bankrupt Indian shadow lender earlier this year

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