India Poised to Emerge Among Asia’s Top Three Investment Destinations: BofA Securities

India is set to become one of Asia’s top three markets for foreign investment inflows, once tariff-related uncertainties subside, according to David Hauner, Head of Global Emerging Markets Fixed Income Strategy at BofA Securities. Alongside Taiwan and South Korea, India is expected to attract strong investor interest, especially in the second half of 2025.

Strong Growth Drivers Set India Apart

"India within Asia should be one of the best markets for investments as it has a lot of unique growth drivers," Hauner told Reuters on Tuesday. He emphasized India’s structural strengths and potential, which remain unmatched in the region.

Rupee to Appreciate, Local Bonds to Benefit

The Indian rupee, which stood at 85.59 per U.S. dollar on Tuesday, is expected to strengthen to 84 by the end of 2025, aided by a softening U.S. dollar and rising investor confidence in emerging market debt. Although the rupee may breach the 84-mark briefly, Hauner believes it will stabilize as the Reserve Bank of India (RBI) continues to accumulate foreign exchange reserves.

India's local currency-denominated government bonds, especially the five-year segment, are expected to gain significantly. BofA forecasts a 25–50 basis points drop in bond yields, with the five-year yield already at 5.85%.

Foreign Inflows Expected to Surge in H2 2025

Despite net outflows of ₹320 billion ($3.74 billion) from Indian government bonds in April and May—triggered by global trade tension concerns—Hauner remains optimistic. He predicts a reversal in capital movement in H2 2025 as inflation trends lower globally and investors shift from U.S. money market funds to emerging markets.

Rate Cut Outlook: More Easing from RBI Expected

BofA Securities expects the RBI to cut the policy repo rate by another 50 basis points during the remainder of the year, having already delivered an equal amount of easing in 2025. This dovish stance could further support bond prices and attract foreign investors into India’s fixed income space.

Global Factors at Play

Hauner pointed out that the weakening of the U.S. dollar and rising concerns over potentially inflationary U.S. fiscal policies under Donald Trump are pushing investors to diversify into more stable emerging markets like India.

Also Read: “1 USD = 85.06 INR”; Indian Rupee Sees Historic Fall against US Dollar