Tue. Sep 26th, 2023
    India’s Sovereign Bonds Await Inclusion in Global Indexes

    India’s government debt market is abuzz with speculation as traders closely monitor the possibility of the nation’s sovereign debt being added to global indexes. Traders are closely following news regarding the Reserve Bank of India’s handling of increased inflows and changes in debt investment rules. The potential inclusion of India’s sovereign bonds in JPMorgan Chase & Co.’s emerging market index is fueling speculation.

    India has been taking steps to open its $1 trillion sovereign debt market to foreigners, but previous talks failed due to the reluctance to grant tax breaks on capital gains. However, given the geopolitical and economic developments in China, Indian officials believe there is a higher chance of inclusion this time. The final decision rests with JPMorgan.

    The excitement is not limited to the debt market, as India’s stock market is also experiencing a surge with state-backed lenders nearing a record. However, the debt market has seen a similar scenario in the past, with bonds rallying on rumors of index inclusion only to decline later.

    The possibility of JPMorgan Chase Chairman Jamie Dimon visiting India later this month has added to the speculation. There are rumors of an announcement regarding index inclusion during his visit. A tweak in JPMorgan Chase’s rules, which now includes the impact of India’s withholding tax on foreigners’ interest income, has further fueled bullish sentiments.

    The potential inclusion of India’s sovereign bonds in global indexes could bring in as much as $30 billion in inflows, according to HSBC Holdings. Traders are cautiously optimistic, but remain aware of past disappointments. The volatility in the market is expected to continue until the end of this month.

    – Bloomberg