Transforming India’s Bond markets: JP Morgan Proposes Inclusion India in GBI-EM Index
- JP Morgan said 23 Indian Government Bonds (IGBs) are eligible for being included in the index. These bonds have a combined notional value of $33 billion, and all of them fall under the category of “fully accessible” for non-residents.
- The process of inclusion is set to commence on June 28, 2024, and will span a duration of ten months. During this period, there will be incremental increases of 1 per cent in India’s index weighting, ultimately reaching the maximum allocation of 10 per cent.
- This inclusion is expected to attract an estimated $30-40 billion in funds inflows between June 2024 and March 2025. This move is expected to reduce yields, lowering government borrowing costs and benefiting corporate bonds.
- Amidst the anticipated market volatility in 2024-2025, the substantial inflows into government bonds are poised to counterbalance any potential depreciation of the INR. Under regular market conditions, we forecast an annual depreciation of 2.5% for the INR for the next 5 years.