India’s Sovereign Bonds May be Listed on the JPMorgan Indexes Next Year

JPMorgan Chase & Co. is poised to make a significant move in the global financial landscape by potentially including India’s sovereign bonds on its indexes next year, a development that could signal increased investment opportunities in the country. Sabrina Jacobs, Pictet Asset Management SA’s senior client portfolio manager for emerging-market fixed income, shared insights from discussions with the index provider, indicating India’s keen interest in the inclusion despite reservations that might be perceived from the outside.

Good News for India

The move could mark a turning point for India. The country has wanted to open its $1 trillion government debt market to include various global funds, only retreating due to concerns about meeting the requirements for index inclusion. Unlike other major emerging markets like China, India has yet to join international indexes, with policymakers wary of potential destabilising effects from sudden inflows of foreign capital. However, experts suggest that resolving operational hurdles and streamlining processes could pave the way for India’s inclusion and subsequent inflows of approximately $40 billion, as estimated by Morgan Stanley.

JPMorgan is expected to announce the results of its index reviews by October, shedding light on whether the inclusion will proceed. While operational challenges persist, Bank of America strategists suggest that the provider might opt for diversification of index constituents, taking into account recent geopolitical developments that have impacted other countries’ bond market accessibility.

Boosting Interest Among Foreign Investors

The prospect of India’s index inclusion has already sparked increased interest from foreign investors, with nearly $3.8 billion of index-eligible bonds, known as the Fully Accessible Route (FAR) notes, flowing into the country this year. These investments have contributed to a 12 basis point decline in yields on 10-year government notes, currently resting at 7.20%. The anticipated inflows could potentially lower borrowing costs, aligning with Prime Minister Narendra Modi’s efforts to boost economic growth through infrastructure spending.

As JPMorgan’s decision looms and India’s index inclusion hopes gain momentum, observers are closely watching how this potential development could reshape the landscape of global investment, impacting not only India’s financial markets but also contributing to the broader narrative of emerging market accessibility and attractiveness for international investors.