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The Woo Group Targets India Bond Market As The Rupee Falls

By Expert Author: Woo Group

The Indian Rupee has declined more than 20% this year, and in line with The Woo Group´s value driven investment strategy, analysts have targeted country for investment. The countries currency has been continually falling against major trading partners, hitting new all-time lows on an almost daily basis. Last week, bonds yields climbed to a 19 month high of 6.52% as the rupee fell. The Woo Group's analyst’s link the rupee´s decline to Federal Reserve plans to taper its stimulus package and other external factors, they believe that the market will correct soon. They also believe that tapering will be weaker than the market is pricing, because the Federal Reserve will emphasize forward guidance.

Analysts have selected Reliance Industries Ltd and Bharti Airtel Ltd. bonds in India as investment targets as the spreads are at the widest level in a year. Five year Indian bond yields have widened more than 40 basis points, while 10 year bonds have widened over 100 basis points. More specifically, they have chosen Reliance Industries' 5.4% 2022 bond notes and Bharti Airtel´s 5.125% 2023 debentures. Bharti´s 2023 bonds have dropped 6.8% this quarter causing yields to 7.51% to 114 basis points.

The country’s central bank has engineered a cash crunch in an attempt to slow the currency´s decline, which has helped to improve investor sentiment. Analysts believe that yields on long bonds will not jump much higher and that investors who have a longer investment horizon will benefit. On August 26th foreign investors put $131 million into Indian debt. As the spreads widen, we have been given the opportunity to select the highest quality bonds.

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