The borrowing is lower as “the government may spend less as we are in election season and the code of conduct is in place,” said Debendra Dash, a trader at AU Small Finance Bank. The borrowing plan accounts for 53% of its full-year target of Rs 14.13 trillion, lower than the 55%-60% the government typically borrows in the first half.
Increased inflows in anticipation of more passive flows to Indian bonds due to the inclusion to global bond indices are expected to stabilise the rupee. But will it appreciate the Indian rupee? Analysts don t anticipate it as yet.
Foreign funds lacking direct access to Indias $1 trillion government debt market are increasing exposure via instruments like supranational bonds and swaps ahead of the upcoming inclusion in global bond indexes.
The benchmark 10-year bond yield closed lower at 7.063% Tuesday from the previous close of 7.0968%, while 13 state governments collectively sold more than Rs 28,000 crore of bonds.
The percentage of foreign holdings in government debt is between 2% and 17% and is unlikely to go up to levels which can cause disruptions. Rather the persistent and long-term nature of these flows will help ease bond yields and support government borrowing, Ashima Goyal said.