RBI's Gupta: India Bonds Beat Equities on AI Trade — SkimNews
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- RBI Deputy Governor Poonam Gupta said India's bond market has outperformed both its own historical record and most other countries in recent years, while equities have not reflected the same optimism, per the RBI's Friday bulletin.
- Gupta credited bond strength to government fiscal commitment, sustained growth expectations, monetary policy credibility, and declining structural inflation pressures, citing The Economist: "India's experience shows the importance of cleaning up public finances and letting central bankers fight inflation in peace."
- Indian equities have lagged partly because AI-led growth narratives in South Korea's KOSPI and Taiwan's TAIEX have drawn capital away — Samsung Electronics and SK Hynix together make up more than half of KOSPI, while TSMC dominates TAIEX.
- India's GDP recorded strong growth in Q1 of FY2026-27, with a moderate current account deficit supported by robust services exports and remittance flows.
- Net FDI into India reached its highest monthly level in five years in July, the RBI bulletin said, strengthening the external sector.
- A World Economic Forum survey found nearly three-fourths of chief economists expect India to record strong or very strong growth over the next 12 months, per Gupta.
Why it matters: Gupta framed the bond-equity divergence as a temporary AI-rotation phenomenon rather than a structural Indian problem, projecting equities will look more attractive once the AI trade fades. Concrete data backs the case: Q1 FY2026-27 GDP was strong, the current account deficit stayed moderate, and net FDI hit a five-year monthly high in July — meaning the bond market's rally is anchored in real fundamentals, not just flows.
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