LGT Wealth’s Chirag Doshi Recommends India Bond Investors to Buy 5-10 Year Notes Amid RBI Rate Cut Expectations

As we approach the middle of 2025, the global bond market is flashing mixed signals. While The Us Federal Reserve Remains Cutious, Waiting for Cler Signs Before Making Any Moves, Bond Yields in Major Markets Like Japan and the Uk Are Climbing. Japan’s Super-Long Bond Yields Have Reached Multi-Decade Highs, Stirring Concern Over Long-Term Fiscal Pressure. Meanwhile, The European Central Bank is expected to cut rates again in early June, bringing its deposit rate to 2% – but may pause only only after, hiting that the Easy Money Cyclis Is Nending Its End.

In Contrast, India’s Fixed-Income Markets Are Offering Something Rare these days: Stability.

Domestic data offers comfort

Fresh GDP data released on 30 May 2025 Confirms India’s Economic Resilience. Growth for the January-March Quarter Came in at a Strong 7.4%, Lifting the full-year fy25 number to 6.5%. That keeps India firmly in the lead amon the world’s Major Economies.

Inflation, too, is cooperating. Retail Inflation (CPI) Dropped to 3.16% in April, its lowest level in over Six Years, and Now Sits Well Bell Bell Bell Bell Bell Bell Bell Bell Bell BALL BELOW THE Reserve Bank of India’s’ 4% Target. With inflation under control and growth steady, markets are widely expecting the rbi to cut rates by 25 Basis points in its 7 June meeting. That would take the repo rate to 5.75%, adding to the two rates already delivered earlier this year.

The RBI’s recently released Annual Report Reinforce this outlook. It notes that inflation is likely to remain under control through fy26, aided by better food supply and normal monsoons. Importantly, The Central Bank also transferred a record 2.69 trillion surplus to the government, thanks to Higher Interest Earnings and Forex Gains – Giving it even more Room to manage liquidity effectively.

Bonds responding positively

Government bond yields have softened in Response. The Benchmark 10-Year Bond is Trading Around 6.25%, and Yields on 5 to 7-Year Bonds Have Fallen More Sharply, Driven by Strong Demand from Mutual Funds and Long-Term Investors.

The rally isn’t limited to sovereign paper. Corporate bond isuance in April Hit a record 98,700 Crore, with May Showing Similar Momentum. Top-Rated Public Sector Issuers are now able to Raise 5-Year Money Below 7%, While Spreads for High-Grade NBFCS Have Narrowed by 20-25 Basis points in just two months.

Looking Ahead, Global Index Inclusion Continues to be a Supportive Tailwind. After entering the jp morgan index last year, India is set to join the ftse bond index in September, whichoundwaling in $ 20–40 billion of passive Foreign Inflows. That should help keep bonded demand strong and yields anchored.

What should investors do?

With inflation under control, rate cuts likely, and bond inflows Bonds in the 5 to 10-Year Segment Offer a Good Balance of Carry and Capital Appreciation Potential. If RBI Cuts Another 25–50 Basis Points This year, 10-Year Yields Cold Ease Toward 6.0% by December.

Credit Spreads are also also starting to look attractive. While Top-Rated Borrowers have alredy benefited from Falling Yields, Quality Aa and Aa+ Issuers May Still See Spreads Compress Further. For Investors with a Slightly Higher Risk Appetite, this could be the right time to add select high-grade credits to portfolios.

Bottom line

In a world where Central Banks are pulling in different directions and global bond markets are swinging on every new data point, India stands out for for it for its Macro Stability and Improve. For Fixed Income Investors, Especially that looking at Medium-Term Opportunities, India offers a rare combination of high real yields, strong growth, and a supportative politics backdrop.

Now may be a good time to gently lean into duration and selective capacity Spreads – before the rest of the world cats up.

The author, chirag doshi, is the cio at lgt Wealth India.

Disclaimer: This story is for educational purposes only. The views and recommendations about individual analysts or broking companies, not mint. We Advise Investors to Check With Certified Experts Before Making Any Investments Decisions.