In the battle between Asia’s two highest-yielding major markets, Indian assets look more promising than those of Indonesia.

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While the Indian rupee has been the second best to the rupiah in terms of carry returns so far in 2023, that looks set to change in second half of the year as investors including Amundi SA and HSBC Holdings Plc see the former as the standout choice. The Indian currency offers higher compensation for risk than the rupiah, with a carry-to-risk ratio of 2.8 compared with just 0.5 for Indonesia, according to data compiled by Bloomberg.

The highest bond yields among major Asian nations and a less volatile currency thanks to the central bank’s intervention are burnishing the appeal of rupee assets. Foreigners plowed $10 billion into Indian stocks this quarter so far, helping the rupee climb to the top of currency charts.

“In terms of the Indian rupee, carry and macro financial stability are attractive for the currency,” said Alessia Berardi, head of EM macro and strategy research at Amundi. “If you have an Asia specified portfolio, or want Asia exposure, this is a currency you want to go to.”

Investor sentiment toward India has been on an upswing amid one of the fastest paces of growth among major world economies. Foreign funds are locking in high yields in local-currency Indian debt as the central bank is seen on a rate pause until early next year.

Benchmark 10-year Indian bonds offer a yield of 7.07 percent, compared with 6.30 percent on similar-maturity Indonesian notes. Investors borrowing dollars to purchase rupiah fixed-income assets have earned 4.7 percent in the first half of the year, compared with 2 percent for India.

“The Indian rupee’s low volatility makes it a strong carry trade candidate,” said Johnny Chen, portfolio manager at William Blair Investments. “Given the relatively high weight of commodity-related exports in Indonesia, the Indonesian rupiah may be subject to more volatility.”

The rupee’s one-year implied volatility slumped more than 100 basis points this year to 5.21 percent on June 23, the least since 2007, data compiled by Bloomberg show. That’s the lowest in Asia after the Hong Kong dollar.