Index Investing News
Sunday, May 25, 2025
No Result
View All Result
  • Login
  • Home
  • World
  • Investing
  • Financial
  • Economy
  • Markets
  • Stocks
  • Crypto
  • Property
  • Sport
  • Entertainment
  • Opinion
  • Home
  • World
  • Investing
  • Financial
  • Economy
  • Markets
  • Stocks
  • Crypto
  • Property
  • Sport
  • Entertainment
  • Opinion
No Result
View All Result
Index Investing News
No Result
View All Result

A vote of confidence in India’s economic stability

by Index Investing News
September 22, 2023
in Opinion
Reading Time: 3 mins read
A A
0
Home Opinion
Share on FacebookShare on Twitter


The addition of Indian bonds in JPMorgan’s Emerging Markets Bond indices is testament to investors’ confidence in the country’s fiscal discipline and macroeconomic stability. That it has come about while access to the Euroclear settlement system is still pending and with almost no concessions on withholding and capital gains taxes is noteworthy.

India will be included in at least one of the JPMorgan Emerging Markets bond indices (and significantly in their JESG variants), the GBI-EM Global Diversified Index suite, beginning 28 June 2024, and thereafter reach 10% of the index weight in a staggered manner over 10 months.

The JPM bond index is one of the three larger global bond indices. The others are the FTSE Russell and Bloomberg Barclays indices.

Given the attractiveness of India’s sovereign bond market (in terms of relatively high yields and a stable exchange rate), it is likely that these indices will also eventually consider including India in their respective indices, if capital account controls are further eased.

A de facto partial easing of capital controls began when the Voluntary Retention Route (VRR) was introduced for foreign portfolio investors in 2019. It gave them more choices of investment instruments and exemptions from some regulatory norms. The scope was then significantly expanded with the introduction of the Fully Accessible Route (FAR) series of bonds in April 2020, which allowed non-residents to invest in specified Government of India securities (G-Secs) without being subject to any investment ceilings.

Twenty-three Indian government bonds (IGBs) with a combined notional value of $330 billion ( ₹27.37 trillion) are eligible for inclusion in the JPMorgan indices. The total notional value outstanding of IGBs is over ₹96 trillion. Of this, the FAR bonds have a notional outstanding of ₹27 trillion. FPIs’ exposure in the FAR bonds is reportedly about ₹95,000 crore.

Details are still awaited, but the following are some potential implications.

It is estimated that investors in the JPM GBI-EM Index have $236 billion invested in the index bonds. Accounting for the assets under management of the various sub-indices, IGB bond buys by FPIs might be in the range of $20-23 billion. Inclusion in associated indices will add to this. These are passive flows which are allocated from investors’ portfolios to the index weight.

In addition, there are likely to be significant active funds flows, where other investors, in anticipation of a drop in bond yields given the additional expected demand from index investors, might take long positions in some of these securities. We are therefore likely to see an even larger balance of payments surplus in FY24 than our earlier anticipation of $17 billion. Consequently, even in the run-up to the start of the index inclusion, we will probably see a gradual and continuing drop in yields of the bonds included in the FAR list.

Note that we expect the Reserve Bank of India’s (RBI) monetary policy committee to begin cutting the repo rate in the second half of FY25, reinforcing the effects on yields of additional demand.

Depending on the magnitudes of these inflows, if the RBI were to intervene in the spot foreign exchange markets to manage volatility in the event of a sharp appreciation of the Indian rupee, there will be a large increase in domestic system liquidity.

Assuming an inflow of around $40 billion via portfolio investments in bonds over the course of the next couple of years, and assuming a clean spot buy by the RBI without swapping into forwards of half the amount, would add around ₹1.7 trillion to system liquidity. This will necessitate some sterilization. While open market operation securities will absorb part of this, an increase in the cash reserve ratio will probably be required.

Over and above this, a fall in yields, being a growth driver and other things being equal, is also likely to increase portfolio flows into equities, thus boosting the stock markets as well.

Saugata Bhattacharya is executive vice-president at Axis Bank. Views are personal.

“Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!” Click here!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint.
Download The Mint News App to get Daily Market Updates.

More
Less

Updated: 23 Sep 2023, 12:31 AM IST



Source link

Tags: confidenceeconomicIndiasstabilityVote
ShareTweetShareShare
Previous Post

The Auto Sector’s Green Transition: Three Roads to Lower Returns?

Next Post

US dollar hits six-month high as markets accept new interest rate regime

Related Posts

Well being Speak: Why CBSE’s transfer to have sugar boards in colleges is wholesome

Well being Speak: Why CBSE’s transfer to have sugar boards in colleges is wholesome

by Index Investing News
May 25, 2025
0

A brand new Central Board of Secondary Schooling (CBSE) directive has requested colleges affiliated to it throughout the nation to...

Authorities-Assisted Suicide Is Spreading Throughout The Western World – FREEDOMBUNKER

Authorities-Assisted Suicide Is Spreading Throughout The Western World – FREEDOMBUNKER

by Index Investing News
May 24, 2025
0

Is it humanitarian empathy, or a nihilistic demise cult that wishes a authorized rationale for inhabitants management?  The legislative push...

‘Advance tipping’ on ride-hailing apps is merely a symptom of lax legislation enforcement

‘Advance tipping’ on ride-hailing apps is merely a symptom of lax legislation enforcement

by Index Investing News
May 24, 2025
0

In a publish on X final week Pralhad Joshi wrote, “Forcing or nudging customers to pay a tip upfront for...

The issue with utilizing the phrase ‘plantation’ –
Las Vegas Solar Information

The issue with utilizing the phrase ‘plantation’ – Las Vegas Solar Information

by Index Investing News
May 24, 2025
0

Saturday, Could 24, 2025 | 2 a.m. The biggest remaining antebellum plantation mansion within the South has burned to the...

Local weather hysterics groom our children to affix the left’s crusades

Local weather hysterics groom our children to affix the left’s crusades

by Index Investing News
May 24, 2025
0

Excessive privilege and fame have by no means been a recipe for emotional stability, however in the present day’s Hollywood...

Next Post
US dollar hits six-month high as markets accept new interest rate regime

US dollar hits six-month high as markets accept new interest rate regime

The 300X Potential of Momentum Aristocrats

The 300X Potential of Momentum Aristocrats

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

RECOMMENDED

Wasting Away In Bidenville! Dow Tanks -500 Points On Friday As Fed Reaffirms Their Fight On Bidenflation – Investment Watch

Wasting Away In Bidenville! Dow Tanks -500 Points On Friday As Fed Reaffirms Their Fight On Bidenflation – Investment Watch

October 2, 2022
Nike (NKE) bets on innovation and partnerships to return to high growth

Nike (NKE) bets on innovation and partnerships to return to high growth

March 25, 2024
It’s JPM time! Which medtechs are expected to issue updates this week? (NASDAQ:ILMN)

It’s JPM time! Which medtechs are expected to issue updates this week? (NASDAQ:ILMN)

January 8, 2024
Assisted Suicide Legal guidelines Improve Suicide Charges, Particularly Amongst Girls

Assisted Suicide Legal guidelines Improve Suicide Charges, Particularly Amongst Girls

April 29, 2022
LRE® on Tour 10/4

LRE® on Tour 10/4

October 5, 2024
Simply Listed | 10795 La Strada

Simply Listed | 10795 La Strada

January 26, 2025
BoE backs strict adoption of global bank capital rules

BoE backs strict adoption of global bank capital rules

November 30, 2022
Sri Lanka election outcomes: Second depend to determine presidential winner | Elections Information

Sri Lanka election outcomes: Second depend to determine presidential winner | Elections Information

September 22, 2024
Index Investing News

Get the latest news and follow the coverage of Investing, World News, Stocks, Market Analysis, Business & Financial News, and more from the top trusted sources.

  • 1717575246.7
  • Browse the latest news about investing and more
  • Contact us
  • Cookie Privacy Policy
  • Disclaimer
  • DMCA
  • Privacy Policy
  • Terms and Conditions
  • xtw18387b488

Copyright © 2022 - Index Investing News.
Index Investing News is not responsible for the content of external sites.

No Result
View All Result
  • Home
  • World
  • Investing
  • Financial
  • Economy
  • Markets
  • Stocks
  • Crypto
  • Property
  • Sport
  • Entertainment
  • Opinion

Copyright © 2022 - Index Investing News.
Index Investing News is not responsible for the content of external sites.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In