India is about to join the esteemed JP Morgan Global Bond Index, which is a big development for the Indian economy. This action may result in a massive infusion of over all $25 billion in foreign capital into the nation’s bond market.
According to JP Morgan, India, which will be a part of the GBI-EM Global index suite as of June 28, 2024, is anticipated to reach a maximum weight of 10% in the GBI-EM Global Diversified Index (GBI-EM GD). There are now 23 Indian government bonds that are index eligible, totaling $330 billion in notional value. It said that the bonds will be gradually included over a 10-month period through March 31, 2025 (i.e., a monthly inclusion of 1% weight). This means more money flowing into the country’s financial system, which can be used for various developmental projects and economic growth.
Gains in the shares of Indian banks, shadow lenders, and debt-service providers were sparked by JPM’s move; these businesses stand to gain from increases in the bond market and the anticipated decrease in their cost of capital.
The choice is the most recent indication of India’s rising allure to foreign investors as the nation’s economic development outpaces peers, its geopolitical influence increases, and businesses like Apple Inc. search for China substitutes. Even while international investors in the Indian bond market are relatively few, they have been increasing recently, and the country’s assets have shown to be resistant to the financial turmoil that has gripped other emerging nations.