JPMorgan Chase & Co. is set to include Indian government bonds in its benchmark emerging-market index, a development expected to attract significant foreign investments into India’s debt market. This move reflects India’s increasing allure to global investors due to its robust economic growth, expanding geopolitical influence, and growing interest from multinational corporations like Apple Inc. looking to diversify beyond China. While foreign participation in India’s bond market has historically been limited, recent years have witnessed a gradual increase in foreign inflows, and Indian assets have demonstrated resilience compared to other emerging markets during periods of financial turbulence.
Starting June 28, 2024, Indian securities will be incorporated into the JPMorgan Government Bond Index-Emerging Markets, with a maximum weight of 10%. This decision is based on India’s introduction of the FAR program in 2020 and substantial market reforms aimed at facilitating foreign portfolio investments. Approximately 75% of surveyed benchmark investors expressed support for India’s inclusion.
India’s inclusion in the index stands in stark contrast to many other emerging markets, particularly neighboring China, which has faced economic challenges and volatile financial markets. This divergence has enhanced India’s attractiveness to global investors.
Foreign investors have already purchased $3.5 billion worth of Indian government debt in the current year, and this index inclusion could potentially drive up to $30 billion in foreign capital, according to HSBC Holdings Plc. India’s equities market has also garnered significant attention, with its rapidly growing economy and strong corporate earnings making it a top choice among major emerging markets.
While concerns about rising oil prices and sustained U.S. interest rates have led to some outflows from Indian equities in September, foreign investors have still poured in nearly $16 billion on a net basis this year, marking the largest annual inflow since 2020. This move towards inclusion in the index is expected to further open doors for foreign capital into India, bolstered by controlled inflation. Overall, India’s inclusion in international indexes is seen as a positive step towards attracting more global investment.
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