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By Bloomberg

India’s 10-year sovereign bonds rose for a second day amid optimism slowing inflation and an improvement in the nation’s public finances will lure global funds.

The 58 percent drop in Brent crude in the past year has helped curb India’s current-account deficit and consumer-price gains, improving the outlook for Asia’s third-largest economy even as a slowdown in China deepens. Moody’s Investors Service said Tuesday policies to cut inflation and red tape could help the nation win a debt rating upgrade.

The recent increase in Indian government bond yields is a buying opportunity, according to Nomura Holdings Inc. Pioneer Investments, which oversees about $244 billion, could increase allocation to India’s local-currency notes, Hakan Aksoy, a London-based portfolio manager, said in an Aug. 25 interview, citing “the higher potential growth, lower commodity prices, stronger central bank and better-perceived government.”

The yield on notes due May 2025 fell two basis points to 7.79 percent in Mumbai, according to prices from the central bank’s trading system. It slumped eight basis points on Tuesday. The yield had climbed 11 basis points to 7.89 percent on Monday, the most for benchmark 10-year debt since December, as India’s rupee and stocks sank amid an emerging-market selloff.

“We have seen some nervousness in the bond markets because of the asset correlation,” said Vivek Rajpal, a Singapore-based rates strategist at Nomura. “The rise in yields is a great opportunity for investors to buy.”

The rupee fell for the fourth time in five days, dropping 0.1 percent to 66.1450 a dollar, according to prices from local banks compiled by Bloomberg. The benchmark S&P BSE Sensex index of shares has fallen more than 8 percent this month as investors fled riskier assets after China’s shock devaluation of the yuan on Aug. 11 spurred speculation of a currency war ahead of a potential increase in U.S. interest rates.

“The bearish global sentiment and the drop in equities is hurting the rupee,” said Ashtosh Raina, Mumbai-based head of foreign-exchange trading at HDFC Bank Ltd. Given India’s strong economic fundamentals, the rupee is likely to recover, he said.