Salient to Investors:

Franklin Templeton Asset Mgmt (India) and Nomura Asset Mgmt predict rupee bonds will extend the longest run of gains in more than a decade as inflation below 5 percent adds room for interest-rate cuts. Nomura says easing price pressures will allow India to add to the most aggressive monetary easing since 2009.

Santosh Kamath at Franklin Templeton Asset said there is a need for lower borrowing costs, given the overall weak macro environment.

The Assn of Mutual Funds in India said investors in India put the most in six months into fixed-income funds in April, and pulled from equity plans.

Simon Tan at Nomura Asset said a 25 basis point to 50 basis point cut is priced into current Indian bond levels and is comfortable to increase exposure onshore.

Shilpa Kumar at ICICI Bank sees the 10-year yield falling below 7 percent for the first time in 4 years as the RBI adds to this year’s 3 rate cuts.

EPFR Global report international investors pulled a record $12.5 billion from bond funds globally last week.

SBI Funds Mgmt and Quantum Asset Mgmt said currency declines threaten to make imported goods costlier, stoke inflation and reduce scope for monetary easing, deter some investors from buying bonds.

Rajeev Radhakrishnan at SBI Funds said the central bank seems to be focused on the current account deficit and external imbalances and there is not much room for interest rates to come down, while the significant rally in bonds will also deter investors from adding to their holdings.

Nomura said foreign investment in India’s bond market is relatively low, which makes local debt less vulnerable to capital outflows triggered by bets favoring US assets, and the easing of rules on foreign ownership of local bonds will spur gains in the market.

Read the full article at http://www.bloomberg.com/news/2013-06-09/templeton-buys-in-longest-sovereign-gain-since-02.html

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