JP Morgan Chase has incorporated Indian government bonds (IGBs) and government securities (G-Secs) into its emerging markets bond index, GBI-EM Global Index beginning June 2024. This move is expected to attract more foreign investment into the Indian market. The inclusion process will be phased in over 10 months spanning from June 28, 2024, to March 31, 2025.
Here are the views of some of the leading experts in the market-
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, “ JP Morgan’s inclusion of India in the Emerging Market Index is a very positive move from the perspective of the Indian economy in general and the capital market in particular. “Most of the corporate bonds yields are benchmarked to the yields on government bonds. Therefore, yields will decline pan India, across industries. The decline in the cost of capital will translate into higher profits for the corporate sector, which, in turn, will boost stock prices enabling the stock market to scale higher levels.”
“This is expected to add a flow of close to USD 24 billion, almost 8x of what we have received this year. India’s current outstanding government debt is close to USD 11tn and is planning to issue another USD 200 billion this year. This is going to open gates for India’s inclusion in other bond indices making the bond markets in India deeper, more liquid and potentially easy for retail investors to invest in. This goes on to add macroeconomic tailwinds for India as the cost of capital comes down with higher liquidity,” said Srikanth Subramanian, CEO, Kotak Cherry.
Palka Arora Chopra, Director, Master Capital Services said that, “We believe the inclusion of Indian Bond came at the right time as China’s economy is facing weakness and slowdown. The inflows will also lead to lower borrowing costs for the Govt which will drive the capex plans of the government further.”
“This move is expected to garner approximately US$25 billion of inflows into Indian Government Bond markets. In the longer run, this could trigger inclusion from other similar indexes, such as Bloomberg Global Aggregate index which may bring about further flows into the market. The announcement to include India’s bonds in the GBI-EM index will support both India bonds and local currency. We expect 10-year Government bond yields to settle comfortably below 7% as we inch closer to the Index inclusion date,” said Churchil Bhatt, Executive Vice President & Debt Fund Manager, Kotak Mahindra Life Insurance Company.