Indian bonds in global indices: another opportunity for investors?
Gov. bonds and Spread
Posted by MoneyController on 26.03.2024
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India's economy seems to be on an upward trajectory: GDP is growing, as is the Nifty 50 stock market index, and the Indian Mutual Fund Association is reporting billions of dollars of inflows every month. More good news now comes from the government bond market.
Indian government bonds will be included in two major bond indices: the JPMorgan Government Bond Index-Emerging Markets (GBI-EM) from June and Bloomberg's Emerging Market Local Currency Government Index from 31 January 2025. One of the first consequences, as Shreyashi Sanyal points out on CNBC, will be lower yields and a strengthening of the Indian currency.
The Indian government debt market is worth around USD 1.2 trillion. As Sanyal writes, the inclusion of Indian government bonds in these global indices (which will be done gradually in the case of JP Morgan's GBI-EM) can help a) achieve the goal of $5 trillion GDP by 2030 and b) increase the efficiency of the Indian financial system.
Investing in India is not easy, Sanyal writes, echoing a comment by Kenneth Akintewe, head of Asian sovereign debt at ABRDN: "This listing will not make it any less difficult to invest in India, but it is likely to encourage more investors to do so. However, Akintewe adds that the reforms that led to the inclusion of Indian debt in the index should actually make it easier to invest in India.
Fitch estimates that the inclusion of Indian debt in the relevant indices could lead to inflows of USD 24 billion. This should lead to lower borrowing costs, which could benefit both the credit and capital markets. However, Fitch adds that the move should have only a marginal impact on the country's solvency.
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