Investor sentiment toward India has been on an upswing amid one of the fastest paces of growth among major world economies. “If you have an Asia specified portfolio, or want Asia exposure, this is a currency you want to go to.” “In terms of the Indian rupee, carry and macro financial stability are attractive for the currency,” said Alessia Berardi, head of EM macro and strategy research at Amundi. Foreigners plowed $10 billion into Indian stocks this quarter so far, helping the rupee climb to the top of currency charts.

The highest bond yields among major Asian nations and a less volatile currency thanks to the central bank’s intervention are burnishing the appeal of rupee assets. The Indian currency offers higher compensation for risk than the rupiah, with a carry-to-risk ratio of 2.8 compared with just 0.5 for Indonesia, according to data compiled by Bloomberg. While the Indian rupee has been the second best to the rupiah in terms of carry returns so far in 2023, that looks set to change in second half of the year as investors including Amundi SA and HSBC Holdings Plc see the former as the standout choice. In the battle between Asia’s two highest-yielding major markets, Indian assets look more promising than those of Indonesia.

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