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By Catherine Bosley
Cash pouring into India from its watershed inclusion into key global bond indexes is already reshaping markets in a country long keen to insulate itself from hot money flows.
Foreign investors have pumped roughly Rs 78,000 crore ($9.4 billion) into eligible sovereign bonds since JPMorgan Chase & Co.’s landmark announcement in September and are beginning to climb up the ownership list. Corporate bonds are outperforming peers, foreign exchange reserves hit a record high and the rupee has shrugged off the impact of a broad strengthening in the dollar.
Here are some charts showing the state of play in Indian markets ahead of the key index change at the end of June.
“This is a significant event. The long-awaited inclusion of India in the index should open the door for increased participation by foreign investors,” said Chidu Narayanan, head of the macro strategy Asia-Pacific at Wells Fargo & Co. Inflows of roughly $25 billion for Indian bonds by the middle of next year are set to support the rupee, he said.
Big Inflows
The inflows have helped make them one of the best performers in local currency emerging market government debt in 2024.
Currency Effect
One outcome of the big inflows has been accelerated intervention by the Reserve Bank of India, which has been buying the incoming dollar flows, resulting in its foreign reserves rising to a record $642.5 billion. The intervention is largely aimed at shielding the rupee from volatile moves.
Record Reserves
Corporate Bonds
Bloomberg Index Services Ltd. will also include some Indian bonds in its emerging market local currency index starting next year. Bloomberg LP is the parent company of Bloomberg Index Services Ltd., which administers indexes that compete with those from other service providers.
First Published: Apr 01 2024 | 8:04 AM IST
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