What is the Impact of India’s Inclusion in the JP Morgan Bond Index
The talk of the town is that investment bank JP Morgan Chase (NYSE:) & Co. finally decided to include Indian government bonds in its emerging markets debt index. This has been a long pending decision and even 1 year back there was a possibility of happening the same but the investment bank refrained from doing so back then.
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But this latest decision has cheered the broader markets and so much that, despite the Gift Nifty’s 70-point cut at one point, the Indian counterpart opened the session on a slightly positive note, going against all global markets.
So why is it such a big news and what does it mean for investors?
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Firstly, it will increase foreign inflows in the country as passive funds that mandatorily have to invest in all constituents of the index will have to purchase Indian bonds as well. There’s no escape here. This will definitely increase foreign investments coming into India.
Just like you need dollars to purchase US bonds, you need rupees to purchase Indian bonds (obviously!). The demand for Indian bonds will likely boost the demand for the rupee as well, leading it to strengthen against the dollar. In fact, the rupee opened today’s session with 27 paise stronger on the back of this cheering news.
Including a country in such a prestigious index increases its credibility on the international platform. This will help Indian borrowers borrow with lesser interest rates, which further curbs the outflow via interest payments. And here again, foreign payments need to be made in dollars, and if this interest reduces, it will also strengthen the rupee.
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The participation of big funds in the Indian market will also support the liquidity in the bond market here, which is not so good as of now.
In case you want to connect with me, reach out on X (formerly, Twitter). My handle is – aayushxkhanna
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The talk of the town is that investment bank JP Morgan Chase (NYSE:) & Co. finally decided to include Indian government bonds in its emerging markets debt index. This has been a long pending decision and even 1 year back there was a possibility of happening the same but the investment bank refrained from doing so back then.
But this latest decision has cheered the broader markets and so much that, despite the Gift Nifty’s 70-point cut at one point, the Indian counterpart opened the session on a slightly positive note, going against all global markets.
So why is it such a big news and what does it mean for investors?
Firstly, it will increase foreign inflows in the country as passive funds that mandatorily have to invest in all constituents of the index will have to purchase Indian bonds as well. There’s no escape here. This will definitely increase foreign investments coming into India.
Just like you need dollars to purchase US bonds, you need rupees to purchase Indian bonds (obviously!). The demand for Indian bonds will likely boost the demand for the rupee as well, leading it to strengthen against the dollar. In fact, the rupee opened today’s session with 27 paise stronger on the back of this cheering news.
Including a country in such a prestigious index increases its credibility on the international platform. This will help Indian borrowers borrow with lesser interest rates, which further curbs the outflow via interest payments. And here again, foreign payments need to be made in dollars, and if this interest reduces, it will also strengthen the rupee.
The participation of big funds in the Indian market will also support the liquidity in the bond market here, which is not so good as of now.
In case you want to connect with me, reach out on X (formerly, Twitter). My handle is – aayushxkhanna
