In this month’s SOE podcast on Personal Finance, Mr Abhijit Roy, CEO and co-founder of GoldenPi, one of India’s largest online bond aggregators, speaks to Aarati Krishnan of Business line on the outlook for interest rates and the opportunities for debt investors. Mr Roy is an IIT Kharagpur and IIM Kolkata alumnus with 15 years of global market experience.
Asked about the outlook for policy rates in India, now that the Monetary Policy Committee is on a long pause, Mr Roy said that he expects rates to start their decline in the latter half of the year, on the back of stable inflation and the economy. He expects the downward move to materialise post elections, perhaps post September 2024.
On whether US yield movements are relevant to Indian investors, he observed that they are certainly a big factor. Foreign investor allocations to bonds play a big role in determining yield movements. Mr Roy believes that India has turned an attractive destination for foreign investors because of the growing economy and stable financial markets.
He expects the inclusion of Indian government bonds in the JP Morgan GBI EM Index to further contribute to the fall in interest rates in India, as global portfolio flows into the specified bonds could accelerate this year. He expects $30-50 billion of flows into the specified Freely Accessible Route government bonds as a result of this inclusion. In the long run, he sees these flows making it easier for the Indian government to conclude its market borrowings.
On whether investors in bonds should consider investing in NCDs for shorter tenors or look to lock into NCDs with 4-5 year terms, he was of the view that this call should depend both on the investor’s holding period and the nature of the entity issuing NCDs. For lower-rated issuers, he would personally prefer to take on lower duration risk and stick to shorter tenors. For longer tenors, he prefers AAA rated issuers or government bonds, which are also offering attractive yields currently. He cautions that investors should not take on too much duration risk if they cannot adhere to a long holding period.
He however believes that this is a good time for regular income seekers such as retirees to lock into long-tenure NCDs from high quality issuers, for stable income. He points out that GoldenPi offers opportunities for regular income seekers to buy government securities from the secondary market for amounts as low as Rs 100. GoldenPi charges no commission on g-sec investments and offers specific tranches of g-secs with high liquidity on the platform.
Commending SEBI for doing a creditable job on attempts to develop the Indian bond market, he sees proposed changes to regulations, such as the Rs 10000 ticket size for privately placed bonds, sharply expanding retail interest in the NCD market. NCDs were earlier considered an option mainly for high net worth investors, with a minimum ticket size of Rs 10 lakh for private placements. But successive reductions in this ticket size, to Rs 1 lakh last year and now to Rs 10000 (if the SEBI proposal goes through) will make NCDs a fixed income product easily accessible to retail investors.