Global shifts may have limited impact on India bonds

There is a high probability of two more rate cuts by the Reserve Bank of India (RBI) in 2025-26, given the stable headline consumer price inflation and the central bank's renewed focus on growth, says Rahul Goswami, chief investment officer and managing director, India fixed income, Franklin Templeton. In an email interaction with Abhishek Kumar, Goswami says monsoon trends, geopolitical developments, movements in yields in developed markets, and commodity prices will be key factors influencing bond yields going forward. Edited excerpts:

- Rahul Goswami

Indian bond yields have mostly remained immune to global headwinds so far. Can this be sustained?

Prudent macroeconomic policies, a stable interest rate regime with a dovish bias from the RBI, and softer inflation are among the factors supporting Indian bond yields.

Other contributors include ample liquidity from the RBI, inclusion of Indian bonds in global bond indices, and strong domestic demand. A favourable current account balance and lower global energy and commodity prices have also helped pull capital towards India's fixed income space. However, monsoon patterns, geopolitical events, movements in developed market yields, and commodity price trends will continue to influence yield movements.

Do you see the surge in US yields hurting overseas demand for Indian bonds?