As India's sovereign debt approaches inclusion in global bond indices, a diverse array of international investors, including long-term institutional funds in Japan, South Korea, and Taiwan, along with exchange-traded funds in Europe, are expressing interest in the domestic bond market.
Anita Mishra, Head of Markets and Securities Services at HSBC India, noted a significant influx of clients, not only from major financial hubs but also from countries like Japan, Korea, and Taiwan. Indian bonds are set to be included in JP Morgan's GBI Emerging Markets bond index in June, while Bloomberg plans to incorporate them in its EM index from January 2025. Since JP Morgan's announcement in September, foreign investors have purchased nearly $9 billion of fully accessible government bonds.
Vikas Jain, Head of India Trading, FICC, Bank of America, mentioned that the interest is coming from Foreign Portfolio Investors (FPIs) globally, and about five fund houses in Europe have launched ETFs focusing on Indian government bonds. The expectation is for a total flow of about $32-35 billion with the index inclusions.
Ashhish Vaidya, Head of Global Financial Markets at DBS Bank India, estimates near-term inflows of $3-4 billion from inclusion in the Bloomberg EM index and anticipates $25 billion over the 10-month period following inclusion in the JP Morgan EM index. This heightened interest underscores the attractiveness of India's bond market to a diverse set of global investors.
