Big week for Indian markets that could pave the way for more foreign entries

Indian investors face a crucial week with announcements due on a review of the country’s key bond index and also the government’s borrowing plan for the next six months, as reported Bloomberg. FTSE Russell will announce its annual review of the equity and fixed income markets on Thursday, with Indian debt already on a watch list for a possible upgrade.

While the government has yet to announce when it will announce its next borrowing program, sources said Bloomberg officials from the central bank and the finance ministry will decide on the plan on Monday.

FTSE earlier this year said users of global indexes were interested in Indian sovereign securities issued through the Full Accessibility Path (FAR), a new category of debt sales introduced by the government last year. without foreign ownership restrictions. FTSE has said it will also launch a version of its FTSE Indian Government Bond index that tracks these stocks in the coming weeks.

The inclusion of Indian sovereign bonds in global bond indices – the influential Emerging Markets Government Bond Index (GBI -EM) and the JP Morgan Global Index – could pave the way for inflows of bonds of $ 170 billion to $ 250 billion over the next decade.

Earlier this month, global financial services leader Morgan Stanley said he expects India to be included in global bond indices in early 2022. According to Morgan Stanley, inclusion of the index will attract $ 170-250 billion bond inflows over the next decade while Goldman Sachs estimates passive inflows to be around $ 35-40 billion if India joins both indices.

Foreign capital inflows are expected to lower borrowing costs, which contributes to debt sustainability as it is important for India to maintain a high quality credit rating.

Indian bonds are already heading for the biggest monthly gain since April and could get a boost if the government decides to cut borrowing for the second half of the year as incomes improve.

The addition of the index seems more imminent after a finance ministry official said earlier this month that the country had completed most of the work required to be part of the global benchmarks.

Indian bonds are also under review for inclusion by JPMorgan Chase & Co., which typically rates its index this month, while Bloomberg Index Services Ltd. said last week that there is currently no estimated timeframe for India’s inclusion in the Bloomberg Global Aggregate Index.

Since 2019, India has been striving to be included in global bond indices, as the increase in government borrowing and the desire to push up investment rates have necessitated the opening of the domestic bond market to a base of wider investors.

(With contributions from Bloomberg)

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