Stars aligning to create a pathway for corporate India to borrow cheaper: Lakshmi Iyer

"I think it is a great and, of course, it is going to be the second largest weight in the index only to China. So, I think from all perspectives, it is indeed overwhelming and very-very proud moment for India," says Lakshmi Iyer, CEO, Kotak Investment Advisors.

How important, people are calling it a watershed moment and, of course, the FIIs have started pre-positioning ahead of that event itself. In your view, how important is it in larger scheme of things?
Lakshmi Iyer: Indeed, it is, you call it by whatever adjective, watershed, momentous, I would say in my parlance, nine months and a baby is born. So, this announcement was made in September of last year and the consummation is happening finally today.

And yes, it happens to be the ninth month. But the thought process obviously was conceptualised and conceived a long time back. Why is it important? Of course, we have already seen the merits of it. We have seen flows coming into fixed income and it continues to be unabated. This is just the sixth month of CY or calendar year 2024 and we have crossed almost 65,000 odd crores and that is a big number given the fact that the total amount that came into last year which is CY 2023 was just about six, six-and-a-half billion dollars, which is about 56,000 crores.

So, I think it is a great and, of course, it is going to be the second largest weight in the index only to China. So, I think from all perspectives, it is indeed overwhelming and very-very proud moment for India.

What are your thoughts on this, the kind of flows we already started seeing and what it could do to cost of capital here in India, because the sense one is getting is that even policymakers work towards getting this thing done and this change done in the larger scheme of things of improving the macros also for the country.
Lakshmi Iyer: No, clearly, if you are looking at the current scenario, whether it is on the fiscal front, whether it is on the inflation front, or whether it is on the flow front, in terms of creating another additional demand lever, the stars seem to be aligned to ensure that the confluence of all of these factors are set to drive interest rates lower further. Of course, we need to have the icing on the cake, which is the policymaking from the central banker, which obviously is impending and may not really manifest itself in a big hurry.

But clearly, these are creating the pathway for corporate India to borrow cheaper. For now, obviously, the spreads have widened between the sovereign bonds and corporate bonds, but the absolute levels are coming down. So, definitely from a medium to long term, it is not that it is going to happen today, tomorrow; but if all of these come together in varying combinations, it is set to have a potential lowering of borrowing cost impact for corporate India.