India Set To Be Among Asia’s Best Markets For Foreign Investment

India is likely to be one of the top three Asian markets attracting foreign capital inflows once tariff-related uncertainties subside, benefiting the rupee and local currency-denominated bonds the most.

David Hauner, head of global emerging markets fixed income strategy at Bank of America (BofA) Securities, shared this outlook during a recent interview with Reuters.

Hauner highlighted India’s unique growth drivers compared to other Asian markets, stating, “India within Asia should be one of the best markets for investments as they have a lot of drivers for growth which other markets do not have.”

Alongside India, Taiwan and South Korea were also mentioned as potential investment hotspots in Asia.

The Indian rupee stood at 85.59 against the US dollar at the time of reporting and has remained largely flat in 2025 after declining by 2.9%.

Hauner expects the rupee to appreciate modestly to 84 by the end of 2025, supported by a weaker US dollar.

However, he anticipates the rupee will stabilise around that level as the Reserve Bank of India (RBI) continues to build foreign exchange reserves.

Emerging market central banks may cut interest rates, and a softer US dollar will attract more investors to Indian fixed income assets.

Bullish Investor Sentiment

Hauner expects foreign capital inflows to pick up from the second half of 2025 as global inflation shows signs of easing, increasing investor confidence in emerging market fixed income.

He explained that as global inflation declines, investors will become more comfortable with emerging market fixed income, leading to increased inflows.

However, despite this positive outlook, foreign investors reduced their holdings in Indian government bonds by over ₹32,000 crore ($3.74 billion) during April and May, driven by concerns over trade tensions.

Hauner noted that a significant portion of capital currently remains parked in US money market funds, which he believes could soon start flowing into Indian assets.

BofA Securities forecasts that the RBI will cut its policy repo rate by an additional 50 basis points throughout the remainder of 2025, adding to the 50 basis points already reduced this year.

Hauner prefers Indian five-year government bonds and expects yields across the bond curve to fall by 25-50 basis points as a result.

Easing global trade tensions, improving inflation, and supportive monetary policy position India to attract substantial foreign investment inflows.

The strengthening rupee and favourable bond yields underscore the growing appeal of India’s fixed income markets among global investors, reinforcing its status as a key destination in Asia’s economic landscape.

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