September 22nd 2023.
In a major development that could draw in foreign investments into India’s debt market, JPMorgan Chase & Co. will add Indian government bonds to its benchmark emerging-market index starting June 28, 2024. The move follows the Indian government’s introduction of the “FAR program in 2020 and substantial market reforms to encourage foreign portfolio investments,” said the American multinational investment bank in a statement on Thursday.
The inclusion of Indian government bonds in the JPMorgan Government Bond Index-Emerging Markets index is yet another indication of its growing appeal to global investors, as India remains one of the fastest-growing major economies. This development holds special significance as various global manufacturing giants are considering India for their China+1 diversification strategy in the post-pandemic world order.
JP Morgan has stated that India is expected to have a maximum 10% weightage in its Government Bond Index-Emerging Markets. The index inclusion would be done in stages over a 10-month period from June 28, 2024 through March 31, 2025. At present, 23 Indian government bonds with a notional value of USD 330 billion are index-eligible.
Foreign investors have already been attracted to India’s equity markets. From March to August, foreign portfolio investors have been net buyers in Indian stock markets. However, the fund inflow had slowed and remained negative in September.
So far in 2023, foreign investors have invested a cumulative Rs 126,998 crore into the Indian stock markets. India's bright economic outlook, projected by various global agencies, appears to have stimulated a renewed interest in domestic stocks. HDFC AMC has also received the RBI’s nod to acquire stakes in Karur Vysya Bank, DCB Bank, Federal Bank, and Equitas Small Finance Bank.
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