(Bloomberg) -- Indian dollar bonds are starting to sputter amid fallout from a recent record surge in local Covid-19 cases, dragging down what had been one of the strongest rallies in Asia this year.The notes have lost 0.3% this month, worse than a 0.2% decline for a broader Asian dollar bond gauge, according to Bloomberg Barclays indexes. That’s paring an earlier outperformance sparked by a strong economic rebound that pushed gains on the Indian debt securities to as high as about 1.3% in 2021 at one pointAlso read: Rupee Tumbles With Stocks as Virus Cases in India Hit New RecordGoldman Sachs shifted to neutral on Indian investment-grade and high-yield dollar credits this month, citing its expectation of limited room for further outperformance amid the surging Covid-19 cases, analysts Kenneth Ho and Chakki Ting wrote in a noteThe global bank lowered its forecast for India’s real GDP growth for the year that began on April 1 to 11.7% from 12.3% earlierPerformance of corporate dollar bonds from India will be driven by perceptions of the country’s ability to get control of the outbreak, said Todd Schubert, head of fixed-income research at Bank of Singapore. Investment opportunities may arise in sectors less affected by the infection surge, such as renewable power credits, if there is a broader selloff, he saidSome bonds in that sector have dropped recently too. The yield on India Green Energy’s dollar note due in 2024 has climbed to 4.3% from 3.4% in late February, while Continuum Energy’s 2027 bond yield rose to 4.3% from 3.9% in the same periodIndian banks’ and shadow lenders’ asset quality might come under pressure again as a second wave of infections threatens a fragile economic recovery, according to Fitch Ratings. Financiers are major bond issuers from India.The rapid increase in Covid cases is also credit negative for Indian airports due to the adverse impact on passenger and aircraft traffic, according to Moody’s Investors ServicePrimary Market - Worst Start Since 2008Companies are off to their slowest start in a financial year for rupee bond issuance in 13 years with the amount plunging to 24 billion rupees ($319 million) since April 1, Bloomberg-compiled data showThe slump comes after new rules from markets regulator Securities & Exchange Board of India came into effect April 1. The regulations require borrowers to obtain due diligence certificates from debenture trustees before listing their securitiesSecondary Market - Long-Tenor Yields DropYields on top-rated rupee corporate notes maturing in 10 years are falling for a fifth straight week, the longest such streak in over a year, after the Reserve Bank of India outlined more measures last week to support the economyBy contrast, yields on shorter-term corporate debt have increased on expectations of higher inflation and growthThe central bank took a step last week toward formalizing quantitative easing, pledging to buy up to 1 trillion rupees of government bonds this quarter, to keep benchmark borrowing costs lowIndian government and corporate bond markets were shut April 13 and April 14 for local holidaysBest and Worst Performing Corporate Dollar Bonds Year-to-DateFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.