India’s Government Bonds Attract $403 Million After JPMorgan Index Inclusion
New Delhi, India – Overseas investments into India’s government bonds, also known as G-Secs, saw a significant inflow of $403 million last week. This surge came after JPMorgan Chase & Co added Indian government bonds to its benchmark emerging-market index, the Government Bond Index-Emerging Markets (GBI-EM), starting June 28.
Foreign Investments Surge
Since the announcement in September 2023, foreign portfolio investors have invested nearly $11 billion into India’s fully accessible route (FAR) bonds. According to a report by Morgan Stanley, net inflows into India’s debt markets have been positive in all but one month in 2024.
Strong Inflows in 2024
The Morgan Stanley report titled ‘India Fixed Income Strategy’ highlighted that the bond market saw foreign inflows in six out of the seven months in 2024. Cumulative inflows to the bond market this year are the strongest in recent years.
Impact of JPMorgan Index Inclusion
One week after India’s sovereign debt market secured a 1% weight in JPMorgan’s GBI-EM index, inflows into FAR bonds remained steady. Officially, 29 FAR government bonds were included in the global bond indices for emerging markets. This inclusion is expected to increase foreign interest and participation in the Indian bond markets.
Foreign Ownership and Local Demand
Foreign investors have added almost $7.1 billion in FAR bonds in 2024, increasing foreign ownership of G-Secs to 2.6%. Local banks hold 40% of G-Secs, while insurance companies and the Reserve Bank of India (RBI) hold 28% and 13%, respectively.
Future Outlook
Morgan Stanley expects the supply of G-Secs to remain robust, supported by the government’s strategic debt consolidation efforts. The inclusion of Indian government bonds in the JPMorgan index is seen as a sign of India’s growing appeal to global investors, especially as various global manufacturing giants look to invest in India as part of their diversification strategy in a post-pandemic world.
JP Morgan had previously stated that India is expected to have a maximum 10% weightage in its Government Bond Index-Emerging Markets, with the inclusion staggered over a 10-month period starting June 28, 2024, through March 31, 2025.