Sluggish bond market is a headache for Indian firms

Bloomberg

India needs a bigger bond market now more than ever, to help get funds to cash-strapped companies cut off from their shadow lenders by a crisis in that sector.
But a Bloomberg survey shows that sales of local rupee corporate notes will grow only 2% this year, a similar rate to 2019 that’s historically low. India’s corporate bond market remains small compared with other major economies, and outstanding rupee issuance amounts to the equivalent of about $540 billion, less than 10% of what is due in China.
Prospects of flat issuance is bad news for prime minister Narendra Modi’s efforts to revive sagging growth, with tight credit conditions feeding a vicious cycle of reduced consumption and investment. Smaller companies, which represent about half of the economy, are struggling with a double blow from a funding squeeze at shadow lenders, and investor wariness of anything but top-rated debt, often meaning government-backed ones.
Companies will raise around 7.5 trillion rupees ($105.5 billion) through domestic bonds this year, according to the average estimate from 11 of India’s top corporate bond arrangers, surveyed by Bloomberg. That’s an increase of about 2% on sales in 2019, and compares with a gain of about 28% a year on average from 2014 to 2017, according to data compiled by Bloomberg.
A stalling in issuance also undercuts attempts by finance minister Nirmala Sitharaman and predecessors to expand India’s corporate bond market to better distribute credit risks and wean reliance off bank loans.
All the news for the market isn’t bad, however, with some arrangers expecting state-owned companies to boost issuance to help push forward government investment plans. There are also some signs of improvement at the shadow bank sector, following a string of central bank rate cuts.

India’s oldest quant fund is revamping its model
Bloomberg

Nippon Life India Asset Management Ltd is adjusting the methodology of its quant equity fund in an attempt to bolster returns in the face of growing competition.
Nippon India Quant Fund is looking at adding more factors into its investment model, Ashutosh Bhargava, who manages the fund, said. Measures include increasing frequency of churn in the portfolio and picking stocks from the broader S&P BSE 200 Index rather than the NSE Nifty 50 Index.
“We are modifying the model and have also widened the universe of investable stocks as part of efforts to improve the performance of the fund and attract more investors,” said Bhargava.
The vehicle was established in 2008 as the Reliance Quant Fund, the first of its kind in India. It has averaged an annual return of about 5.6% over the past five years, compared with about 9% for the Nifty.
Quant funds globally have delivered uneven returns in recent years as they’ve struggled to cope with market volatility. That has spurred growing doubts over various quant strategies that have been grappling with underperformance and competition from cheap exchange-traded products.