Bond market actuality examine: ‘Microsoft, Apple, and NVIDIA are larger than India’s market’, professional says
The hole between Indian and US 10-year bond yields has narrowed to its lowest level in over twenty years, shrinking to 164 foundation factors (bps) as US bond yields surged amid fiscal deficit considerations. In keeping with Bloomberg information, that is the smallest unfold since July 28, 2004, when it stood at 135 bps. Presently, the Indian 10-year benchmark bond yield is 6.2496%, whereas the US 10-year Treasury yield is 4.5866%.
Nonetheless, Akshat Shrivastava, Founder and CEO of Knowledge Hatch, famous in a submit that whereas India’s fairness market has develop into globally enticing, its bond market stays in its infancy when in comparison with world requirements.
Explaining the distinction, Shrivastava mentioned the full dimension of India’s bond market—together with each authorities and company bonds—is roughly $2.5–3 trillion, which is lower than the market cap of a single US tech firm. Against this, the US bond market is valued at over $50 trillion, making up almost 40% of the worldwide bond market.
He highlighted that Microsoft ($3.24 trillion), Apple ($2.97 trillion), and NVIDIA ($2.78 trillion) are every larger than India’s complete bond market.
“Companies like Microsoft, Apple and NVIDIA, EACH are larger than India’s complete bond market.
– Microsoft: $3.24 trillion
– Apple: $2.97 trillion
– NVIDIA: $2.78 trillion
India’s bond market is 5% that of US’s bond market. We do not compete,” Shrivastava wrote on X.
He added the US cash managers don’t even consider India, as India. They lump India with rising markets (EMs). And, make their choices: whether or not to place cash in EMs or keep in developed markets. Then comes the 2nd layer of debate: how a lot fairness vs bond break up to do. This relies on their studying of macros.
In keeping with market analysts, a narrowing unfold between the yields of presidency bonds in numerous nations could immediate overseas traders to withdraw their investments from Indian markets. This phenomenon sometimes happens when the yield differential diminishes, main overseas traders to repatriate funds again to their dwelling nations from rising economies.
So when world asset managers make allocation choices, India not often seems as a standalone alternative. As an alternative, it’s grouped right into a broader EM basket with nations like Brazil, Indonesia, and South Africa.
“Lengthy story quick: we aren’t competing with the U.S. Our markets should not deep sufficient or massive sufficient,” Shrivastava concluded.
In a separate submit earlier immediately, Uday Kotak, Founder and Director of Kotak Mahindra Financial institution, flagged a big shift within the world bond panorama: the shrinking unfold between Indian and U.S. 10-year bond yields.
Kotak famous that this represents a pointy compression within the historic yield differential between the 2 nations. Traditionally, Indian bonds have supplied a lot greater yields to compensate for greater inflation, sovereign danger, and forex volatility. However this narrowing hole indicators shifting dynamics in world capital flows and investor sentiment.
Kotak added that additional convergence—or perhaps a reversal—in yields would depend upon broader macroeconomic modifications:
“It relies upon primarily on relative inflation, danger premium, belief, and liquidity, for world and home traders in these two nations,” he mentioned.
This, he advised, could possibly be an indication of India’s maturing financial system and bettering macro fundamentals, which can be reshaping how traders understand danger and return in rising markets.
