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India Bonds Look Good Long-Term: CIO
CNBC.com | March 30, 2012 | 04:16 AM EDT

DespiteIndia’s current struggles, investing directly in India’s fixed income market will yield returns , Steven O'Hanlon, CIO of Fixed Income at ACPI told CNBC.

"At the moment, the India market is predominantly around the government and quasi-government debt," O'Hanlon said. "There is a corporate market, but it is very small. The real focus for us is around the India government market which is getting a very attractive yieldof around 8.5-8.6 percent."

Although the yield is attractive, there are important risks to consider.

"The risks are, first and foremost, if the central bank backs down on a hawkish view on inflationas we’ve seen in the rest of the world," O’Hanlon warned.

However, he believes that India shows long-term investment potential.

"As long as they’re adamant that they’re going to fight inflation first and growth second, as a fixed income investor, it is a lot more comforting than buying into UK gilts or the U.S. where you know inflation is a secondary issue," O’Hanlon said.

Brent crude is currently hitting all-time highs in India, and energy subsidies have nearly doubled in terms of GDPsince 2007.

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