JPMorgan Chase & Co. will add Indian government bonds to its benchmark emerging-market index, a keenly awaited event that could drive billions of foreign inflows into the nation’s debt market, Bloomberg reported.
The index provider will add Indian securities to the JPMorgan Government Bond Index-Emerging Markets starting June 28, 2024. The South Asian nation will have a maximum weight of 10% on the index.
Currently, 23 bonds worth a combined notional $330 billion are eligible to be added into the index. Inclusion will be staggered over 10 months at roughly 1% weight per month, the report said quoting JPMorgan.
The decision is the latest sign of India’s growing appeal to international investors as the country’s economic growth outstrips peers, its geopolitical influence grows, and global companies, including Apple Inc., look for alternatives to China.
While foreigners play a small role in the Indian bond market, inflows have been picking up in recent years, and the country’s assets have proven resilient to financial turbulence that has roiled other developing nations, the report said.
Lower yields will hand gains to the nation’s state-backed lenders via a boost in treasury income. Non-bank lenders will also be in focus, as the lower cost of capital will likely provide the much-needed relief on borrowing costs for several banks.
Foreign investors have bought $3.5 billion worth of Indian government debt this year, according to data compiled by Bloomberg.
On the equities side, India has been one of the top investment destinations among major emerging markets this year, with its fast-growing economy and solid corporate earnings pushing the nation’s equity benchmark near an all-time high.
While concerns over rising oil prices and higher-for-longer US interest rates have spurred outflows from local shares in September, overseas investors have bought almost $16 billion on a net basis this year, which is the biggest annual inflow since 2020, the report noted.
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