Indian bond markets, according to HSBC MF, are ready for investments of $100 billion

Indian bond markets, according to HSBC MF, are ready for investments of $100 billion

Indian bond markets, according to HSBC MF, are ready for investments of $100 billion

The JP-GBIEM index's inclusion, a large and liquid market, a solid macroeconomic backdrop, good risk-adjusted returns, diversification advantages, high yields, FX stability, and the expectation of more international portfolio investors are some of the factors generating interest.

Starting on June 28, India will be a part of JP Morgan's GBI-EM global index package.

HSBC Mutual Fund projects that targeted allocations of up to $100 billion over the next three to five years might bring $100 billion into the Indian government bond market, positioning Indian government bonds to become a major participant in the global index by 2024.

A sizable and liquid market, a solid macroeconomic framework, attractive risk-adjusted returns, the advantages of diversification, high yields, stable foreign currency reserves, participation in the JP-GBIEM index, and projected growth in foreign portfolio investments are some of the factors generating interest.

Up to $50 billion in inflows will result from the inclusion, and comparable sums are anticipated from significant institutional investors.

According to HSBC, significant institutional investors, including pension funds, central banks, sovereign wealth funds, and endowment funds, would be keeping a close eye on and becoming acquainted with the Indian bond market as part of their developing market allocations. HSBC Mutual Fund anticipates a move away from just include major global institutional investors in its EM index allocation and toward a more strategic allocation by them now that operational challenges have been overcome and investors are appreciating the advantages of India's bond markets. It was once.

It said, "This could potentially push supplementary foreign portfolio investment (FPI) inflows to about $100 billion over the next 3-5 years, whereas participation by foreign investors would be only 8- Market." This is in addition to about $50 billion from index-related inflows.

India's economy is expected to develop at a robust rate and rank third in the world by 2027. This success is reflected in the stock market, which has a market capitalization of around $4 trillion, of which FPIs make up about 16%, or $650 billion.

Starting on June 28, India will be a part of JP Morgan's GBI-EM global index package. India is expected to attain the highest possible weights in GBI-EM Global Diversified at 10% and in GBI-EM Global Index at 8.7%. Currently, $213 billion of the $236 billion benchmarked to the GBI-EM GD family of indexes is made up of 23 Indian Government Bonds (IGBs) with a total value of $330 billion that are eligible for indexation. The inclusion of IGBs in the index is restricted to those classified as fully accessible routes. For local currency debt, India has ratings of 'BBB-' from Fitch and S&P and Baa3 from Moody's.

The global index provider Bloomberg Index Services Ltd. is reportedly consulting on whether to include India's Full Access Route (FAR) bonds in its Emerging Markets Local Currency Index. Foreign investors are not subject to any limitations while purchasing FAR bonds.

This inclusion is indicative of the possibility of significant further inflows, as China has shown since 2019. In addition to being the result of economic expansion and regulatory changes, the tailwind from index-linked flows is predicted to push big institutional investors into standalone, strategic investments in India. Bond market included in the HSBC analysis