India's decision to deregulate bond prices a good move, say investors

Foreigners say move to market pricing will instill discipline

Global fund managers are applauding a move by India to deregulate the prices of bonds sold by the country’s states, which could spur overseas interest in the $350 billion market even if there are short-term losses.

The liberalization will allow for a greater differentiation among the states, which have widely varying levels of growth, debt and wealth, overseas investors including Aberdeen Asset Management Asia Ltd. say.

Securities sold by the nation’s 29 states will be valued at market prices, the Reserve Bank of India said at its policy meeting last week, discarding a long-standing rule that mandated adding a 25-basis point mark