Dear Investors,
A significant milestone has been achieved by the Indian bond
market with its inclusion in the JP Morgan’s widely tracked Government
Bond Index-Emerging Markets (GBI-EM). This development marks a
transformative moment in the landscape of global finance, with far-reaching
implications for investors, policymakers, and market participants alike.
As India continues to position itself as a key player in the
global economy, the inclusion in the bond index serves as a testament to its
growing significance on the world stage. This stride of India, is poised to provide a substantial boost to the
Indian Rupee (INR) and its international standing.
The long-term implications of this development are noteworthy.
India's bond yields currently enjoy a significant advantage over those of its
counterparts in the US and China. With India's 10-year government bonds
yielding at 7.2 per cent compared to 4.5 per cent in the US and 2.7 per cent in
China, the attractiveness of Indian bonds to global investors is likely to grow
substantially.
Moreover, despite being a large and liquid market, Indian
bonds have historically been absent from major global or emerging market
indices. Therefore, JPMorgan's decision to include Indian bonds in its index is
not only a significant validation of India's bond market maturity but also
paves the way for increased global participation.
During the inclusion period, it is anticipated that the
Indian bond market will witness a substantial influx of capital, with estimates
suggesting inflows of USD 23-30 billion. This infusion of capital will not only
deepen the liquidity of the Indian bond market but also, provide new avenues
for investors to diversify their portfolios.
It is also worth noting that India's bonds are being
considered for inclusion in other major indices, such as the FTSE Emerging
Markets Government Bond Index, further underscoring the growing recognition of
India as a key player in the global financial markets.
In conclusion, the inclusion of Indian bonds in the index
represents a significant step forward for the Indian bond market and reaffirms
the value that this asset class brings to a diversified global portfolio. This
landmark development highlights India's growing importance in the global
financial landscape and sets the stage for increased international investment
in Indian debt securities.
Author:
Thakur Ajit Singh
Quick Turtle | Graded Financial
Services | AskCred.
Management Consultant | Trainer
