JPMorgan plans to include India’s bonds in its indexes following the resolution of obstacles. Sabrina Jacobs, from Pictet Asset Management, shared that India is highly interested in this inclusion and aims for a launch around mid-2024. Foreign investors have already invested $3.8 billion in bonds for indexing this year which could lead to borrowing costs and contribute to India’s growth, under Prime Minister Narendra Modi.
JPMorgan Chase & Co. is poised to introduce India’s sovereign bonds to its indexes in the coming year, as the obstacles to investment are being successfully resolved, as indicated by one of Europe’s prominent asset managers.
Sabrina Jacobs, a senior client portfolio manager specializing in emerging-market fixed income at Pictet Asset Management SA, shared insights from her discussions with the index provider. Despite appearances to the contrary, India is enthusiastic about this inclusion. Jacobs mentioned, “Our discussions have revealed India’s strong interest in this move. The timeline we are considering is a launch in mid-2024, followed by a gradual phase-in.”
In recent years, India has made strides toward opening its $1 trillion government debt market to global funds, but it has at times stepped back due to unmet index inclusion requirements. It remains one of the significant emerging markets yet to join the ranks of international gauges, such as China. Policymakers are cautious about the potential risks associated with substantial inflows of speculative capital.
Morgan Stanley has projected that India’s inclusion in two of the three major global bond indexes, including JPMorgan’s emerging market gauge, could lead to an influx of $40 billion.
The unveiling of JPMorgan’s index review results is expected by October. In the previous year, the institution highlighted the need to address certain issues, such as the lengthy registration process and the operational preparations necessary for onshore trading, settlement, and asset custody.
Despite these operational challenges, there is a possibility that the index provider will proceed with the inclusion. Bank of America strategists, in a statement from the previous month, indicated that this move could enhance the diversification of index constituents. Geopolitical tensions, including Russia’s actions in Ukraine, have led to the removal of entities from indexes, while concerns have arisen about China’s sovereign debt.
As India’s aspirations for index inclusion regain momentum, foreign investors have already invested $3.8 billion in index-eligible bonds, commonly known as the Fully Accessible Route (FAR) notes, in the current year. This amount nearly doubles the inflow recorded in 2022. Additionally, yields on 10-year government notes have decreased by 12 basis points this year, settling at 7.20%.
These incoming investments are expected to have a positive impact on borrowing costs, thereby supporting Prime Minister Narendra Modi’s initiatives for infrastructure spending and stimulating economic growth.
Jacobs expressed optimism about India’s economic performance, describing it as a robustly domestic-driven growth engine. She noted that the fund holds a favorable view of India’s bonds and has invested in them accordingly.
