look news india
Ahmedabad: Friday, June 28, 2024 is going to be a golden day in the history of India's debt market. From today, India's government securities will be included in the emerging market index of JPMorgan Chase & Co. To take advantage of this historic achievement of the Indian economy, foreign investors have poured about $8 billion into the Indian bond market in the first half of 2024. This flow is much higher than last year.
However, according to experts, this is just the beginning as the local bond market will see an inflow of about $30 billion in the next 10 months. Net investment by foreign portfolio investors in the domestic debt market in the first half of 2023 was only $2.1 billion. Analysts including Goldman Sachs' Danny Suwanapruti said that given the inflow of $11.2 billion since the announcement of India's inclusion in the bond market, we could see an additional $30 billion inflow in the next 10 months, or an average of $3 billion per month. Comment.
JPMorgan Chase & Co had announced in September last year that it would add Indian government bonds to its benchmark global bond index Emerging Markets Index. India will be the 25th market to enter the GBI-Emerging Markets Global Index category.
The inclusion will be for a period of 10 months from Friday to March 31, 2025. India's weightage in the index will be 1 per cent, which will gradually increase to 10 per cent over a 10-month period. Since the announcement, FPIs have invested about $12.9 billion in domestic bonds, significantly higher than the total of $8.4 billion in 2023.
According to Gloria Kim, head of index research at JPMorgan, the inclusion of government bonds has the potential to attract $20-25 billion of global flows into India-Kashmir.
Due to the fall in US Treasury yields due to foreign inflows, fiscal consolidation and inclusion of government securities in global indices, India's bond yields have also declined in the last six months and due to inclusion of this index in the next six months, the yield may fall to 6.80-6.85 per cent in 3 months
Besides, the inclusion of the bonds will also double foreign ownership of government bonds. Foreign holdings in India's debt are about 2.4 per cent of total outstanding debt and JPMorgan expects this level to reach 4.4 per cent next year. There is no limit on foreign investment in securities included in global bond indices. In recent months, foreign investors have started buying long-term government bonds in anticipation of better returns on the back of interest rate cuts by the RBI.
