The Lemon Fool

Do people have a view on the wisdom (or otherwise) of holding India Government Gilts? Available on CBonds and attractive rates. Surely there's a catch

Joewads wrote:Do people have a view on the wisdom (or otherwise) of holding India Government Gilts? Available on CBonds and attractive rates. Surely there's a catch

I'm assuming these are rupee-denominated Indian government bonds, and that you don't have any rupee-based expenses - you're a sterling-based investor looking for an investment opportunity.

The starting point for analysing this should be Covered Interest Rate Parity: i.e. when you save, or buy bonds, in a higher-yield foreign currency, the increased interest is expected to be offset by a capital loss from the decline in that currency against your home currency.

So the investment thesis that would drive you to invest in Indian gilts would be that if you believed the rupee would outperform against sterling (in the sense that INR/GBP rises over the life of your investment, or falls by less than would be expected based on the interest rate differential). That might be a valid thesis! But just seeing a difference in yields isn't enough to support it.

ABERDEEN STANDARD SICAV I INDIAN BOND CLASS X - INCOME (GBP)

this might be of interest...

There is also the problem that the Indian rupee is only a partially convertible currency. India has put restrictions on trading the rupee. This usually leads to bad exchange rates when transferring money in and out of India.