Indian Asset Managers Pivot to Long-Duration Bonds Amid Geopolitical Turmoil

Institutional investors in India are strategically shifting their portfolios toward ultra-long-term government bonds as a defensive measure against escalating geopolitical tensions. This tactical move aims to insulate domestic portfolios from the volatility currently impacting global markets. Fund managers, including DSP Asset Managers Pvt. and Tata Asset Management Pvt., are prioritizing 30-year-plus tenors. This represents a distinct pivot away from the more commonly traded five-year and 10-year bonds, which are perceived as more susceptible to the immediate shocks stemming from the conflict in Iran. The attraction to these long-dated securities is not solely based on risk aversion. Market participants are citing a combination of tightening supply and increasing demand for these specific instruments. Furthermore, a rising yield premium over the Reserve Bank of India's policy rates is making the 30-year papers more attractive on a risk-adjusted basis. This trend suggests a growing preference for 'local plays' within the Indian domestic market to mitigate external macro shocks. By locking in long-term yields, these funds are attempting to stabilize returns while the global geopolitical environment remains unpredictable.