Indian rupee has the highest total return among 23 emerging markets. India is slated to be the world’s fastest growing economy, overtaking China. According to an analysis compiled by Bloomberg, investing dollars in Indian rupees will get you a return of 5.2% including interest this year.
If you were to compare this across 23 emerging market countries including Mexico, the peso would have earned a gain of 3.5% and the Chinese yuan 2.1%. Even though India’s currency has lost 2.5% since March 31,2015 it has not adversely affected forecasts to dip lower.
“Among emerging-market currencies, India still looks relatively attractive,” said Mitul Kotecha, head of Asia-Pacific currency strategy at Barclays PLC in Singapore. “The rupee’s high yield, and India’s improving economic and political fundamentals are likely to remain attractions for longer-term investors.”
Indian bond returns also have seen the best gains in Asia in local currency terms for the last six months. Rupee denominated bonds obtained returns of 5.8% (versus Chinese notes 3.1% and 2% on Indonesian as compiled by Bloomberg. The 10-year note in India when compared to similar mature Treasuries pays 553 basis points higher.
The foreign reserves also have seen a record rise to reach a peak of USD $353 bn as at May 15, 2015. This and the accelerated growth and reduced deficits provide India with enough buffer to volatility in fund flows according to Reserve Bank of India’s Governor Raghuram Rajan. PM Modi is on track to open up more industries and Rajan to increase foreign investments quotas along with more rate cuts. This duo is set to accelerate the Indian economy in the next few years.
SOURCE: South China Morning Post by Victoria Ruan May 27 2015