India seen as last BRIC standing

Analysts and arrangers increasingly bullish on rupee-denominated bonds judging by the mood at FinanceAsia's latest Annual Borrowers and Investors Forum in Singapore.
From left: Lin-Jing Leong, investment manager, fixed income, Aberdeen Asset Management; Atsi Sheth, associate managing director, Sovereign Risk Group, Moody’s Investors Service
From left: Lin-Jing Leong, investment manager, fixed income, Aberdeen Asset Management; Atsi Sheth, associate managing director, Sovereign Risk Group, Moody’s Investors Service

Top debt issuers and lead arrangers at FinanceAsia's latest Annual Borrowers and Investors Forum, Southeast Asia, cohered around a positive outlook for rupee assets on Thursday.

“I think the dollar has topped out and our favourite local currency asset denomination right now is the rupee,” Kaushik Rudra, head of rates and credit research at Standard Chartered, said to a packed hall in Singapore, encapsulating the optimistic view.

Rudra referenced recent masala issuances and suggested local bond demand in the currency, as well as Indian government moves to liberalise capital markets, heralded an ongoing positive run for rupee bonds. 

"There's a lot of interest from international investors in the [rupee] now," Rudra said. "There's about $5 billion to $7 billion remaining worth of local corporate bond market quotas for international investors made available by the [Reserve Bank of India], and they will open that up over the next few months."
While ostensibly focusing on Southeast Asia’s capital markets, panels at the conference inevitably touched on Chinese and Indian issuance and the regulatory developments that orbit the region. 
Rudra predicted a flood of capital issuance from China as banks there followed prodding from regulators to diversify their funding. But throughout the day, participants in the conference representing issuers, asset managers, arrangers, and ratings agencies, came back time and again to positive outlooks on India.
Lin-Jing Leong, an investment manager for fixed income with Aberdeen Asset Management, pointed to financial reforms driven by Indian prime minister Narendra Modi and Reserve Bank of India governor Raghuram Govind Rajan as key to the story.
Leong sketched an overarching narrative of a government using competitive federalism, a policy of transparently ranking India’s states and provinces against each other, to drive bottom up efficiencies in India’s long-disparaged regulatory agencies.
When reform stalled at a national level (Leong used land reform as an example of this), Modi encouraged state or provincial reforms that allowed him to nimbly outstep oppositional intransigencies.
Particularly, Leong pointed out the provincial drives in Andhra Pradesh to establish regional co-operative land banks as an example of this dynamic.
Atsi Sheth, an associate managing director at Moody’s, concurred, espousing a positive outlook on sovereign risk for India going forward.
"India has been seen by some as the last BRIC standing,” Sheth said, alluding to the growth setbacks in Brazil, Russia, and China. “Modi and Rajan deserve some credit for that.”
Sheth said central bank actions had engineered a steady return for the rupee from 2013, when the currency plummeted against the dollar.
Rajan had shown a willingness to contain inflation with restrained interventions that solidified a positive sovereign risk outlook for the country going forward, she said.
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