Indian bonds to see billions of dollars in inflows due to inclusion in JPMorgan index | Wilnesh News

India is set to see billions of dollars of inflows into the country’s rupee-denominated government debt market as Indian state bonds debut on the JPMorgan Emerging Markets Index on Friday.

This is According to reports, this is the first time that Indians Government debt is included in global indices.

Puneet Pal, head of fixed income at PGIM India Mutual Funds, told CNBC’s “Asia Roadmap” that the Indian bond market has seen foreign inflows of about $10 billion in the past nine months since the announcement. .

In September last year, JPMorgan Chase said that the inclusion of Indian bonds in the emerging market government bond index would be staggered over 10 months, from a 1% weighting in June to a maximum of 10% in April next year.

Deepak Agrawal, chief investment officer for debt at Kotak Mutual Fund, told CNBC earlier this year that he expected inclusion in the program to generate “a steady flow of approximately $2.5 billion to $30 billion over the next 12 to 18 months after the rebalancing period begins.” ” June 2024.

Pal said that in the medium to long term, the inclusion of Indian government bonds will have a positive impact on the entire bond market.

“We expect yields to move lower, especially over the coming year, with yields on the longer end supported by strong macroeconomic fundamentals.”

Pal said India’s macroeconomic fundamentals are “very strong and stable” and headline inflation is within the Reserve Bank of India’s target range.

India’s inflation rate in May was 4.75%, falling for the fifth consecutive month and hitting the lowest level since May 2023. RBI has inflation target 4%, with the upper and lower limits being 6% and 2% respectively. Pal forecasts interest rates will be 4.5% in India’s fiscal year ending March 2025.

Other positives he highlighted include the current account surplus in the first quarter of 2024, the stability of the Indian rupee and the reduction in the country’s fiscal deficit.

“The macroeconomic situation and fundamentals are looking quite good, which has led to capital inflows into the Indian bond market and a positive outlook for the Indian market,” he said.