High global yields making Indian bonds unattractive

Indian G-Secs are unlikely to attract foreign inflows in the near term as global yields are high, believes Rajeev Radhakrishnan, CIO – fixed income at SBI Mutual Fund.

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He tells Christina Titus that the Reserve Bank of India's (RBI) change of stance has been a bit of a dampener for transmission. Excerpts:

With RBI cutting cumulatively 100 bps since February, followed by a change in the stance in the June policy review, what is your view of the debt market?

The recent policy delivered a set of measures which were a bit unanticipated. The change in the stance and 50-bps repo rate cut were surprises, but the biggest one was the reduction in the cash reserve ratio, that too on a forward basis. But when you look back, there is a merit in front-loading actions, as they help in faster transmission. However, the whole communication around the stance change was a bit of a dampener to some of the transmissions that had happened over the last few months. Consequently, yields on short-end bonds rose 20-25 bps, neutralising the transmission. But when you look at yields a year or even three months back, it came down materially.