In Modi government’s two years, Indian bonds emerge as best-performing asset class by a wide margin – Economic Times

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MUMBAI: In the two years since the Narendra Modi government came to power, Indian bonds — corporate and government — have emerged as the best-performing asset class by a wide margin.

The Crisil Composite Bond Index has gained 22.5% over this period, far outperforming both equities and gold that have posted returns of 5.3% and 5.7%, respectively.

Softening interest rates have clearly benefited bonds, even as a sharp rally in stocks that took the Sensex to a life-high of 30,000 in March dissipated.

However, equity fund fl ows over the past two years suggest that domestic investors in stocks continue to believe in the long-term India story.

For instance, equity funds attracted net infl ows of nearly Rs1.4 lakh crore against Rs69,460 crore into income and gilt funds over the past two years. Despite bonds generating higher returns, stronger fl ows into equity funds suggest that investors are for the fi rst time considering “future potential rather than past performance”, said Nilesh Shah, managing director of Kotak AMC.

Motilal Oswal, chairman of the eponymous fi nancial services fi rm, agreed. Citing the higher equity fl ows, Oswal said: “Smart money has moved into equity funds in anticipation that the market will shoot up as corporate earnings turn around.”