Indian companies are jostling to sell at least $1 billion of Masala bonds in the coming months as Prime Minister Narendra Modi’s resounding
victory in state elections boosts investor confidence.
More issuers are planning to tap the market as Modi’s majority win is seen emboldening him to take more measures to spur expansion in Asia’s third-largest economy. Foreigners are being lured to the nation’s stocks and bonds, propelling the rupee to its best first quarter since 1975.
“Modi’s win in the election certainly improved investors’ sentiment on India, as evidenced by a stronger Indian rupee,” said Neeraj Seth, head of Asia fixed income at BlackRock Inc. in Singapore. “This is supportive of Indian rupee-denominated assets such as Masala bonds as investors are exposed to the currency.”
Issuers planning offshore rupee debt sales in coming months include NTPC Ltd, National Highways Authority of India and Power Finance Corp., after mortgage lender Housing Development Finance Corp. last month sold the biggest Masala bond by an Indian company They’ve raised just 138 billion rupees ($2.1 billion) via such sales since an inaugural transaction in July; the July-September period was the biggest quarter, with four issuers pricing 83.3 billion rupees Cheaper onshore funding, a weaker rupee and worries that economic growth would decelerate after demonetization slowed Masala bond offerings in the October-December quarter
Modi’s renewed mandate to push ahead with his reform agenda will strengthen the Indian economy and underpin further gains in the currency, said Sudip Shah, London-based chief executive officer of Orbit Investment Securities Services Plc.