Dollars & Sense | Time to invest in Indian Corporate Bond mutual funds?

As we approach the holiday season, I find myself on a mission to invest for next year rather than simply go shopping.

I have begun to pester my investment adviser about mutual funds in India. Why? For the simple reason that in the last couple of months, global fund managers have started their first Indian corporate bond mutual funds.

JPMorgan Asset Management India’s Corporate Debt Opportunities Fund and Deutsche Asset Management India’s DWS Corporate Debt Opportunities Fund are just two of the players in the market.

But historically there hasn’t been a real market for corporate debt in India. So why now?

Nandkumar Surti, CEO of JP Morgan Asset Management India, says it’s because in the past interest rate swings have been too high for secondary market trading for corporate bonds. That and the fact that money market rates have yielded 9 per cent to 10 per cent returns have led investors to think “why bother with corporate bonds?”

But financial analysts will tell you that credit risk in India has dropped thanks to Prime Minister Narendra Modi’s bid to revive the economy. Bloomberg says the risk of Indian companies reneging on their debt has fallen to a three-year low.

Surti doesn’t necessarily agree.