JPMorgan to Add Indian Government Bonds to Benchmark Emerging-Market Index
JPMorgan Chase & Co. has decided to add Indian government bonds to its benchmark emerging-market index, which could bring billions of dollars in foreign inflows into the country’s debt market.
This is a welcome development for Indian policymakers and experts, as it gives global investors greater access to the world’s fastest-growing large economy and offers some of the highest returns in the region.
The inclusion of Indian bonds in JPMorgan’s much-tracked Government Bond Index-Emerging Markets (GBI-EM) is crucial as it would improve confidence in India’s local currency, which has hovered near record lows of late.
The securities will be added to the JPMorgan Government Bond Index-Emerging Markets starting June 28, 2024. The South Asian nation will have a maximum weight of 10 percent on the index.
Some experts believe that this could bring significant foreign inflows to the Indian debt market. Others believe that India’s reluctance to provide concessions on the capital gains tax imposed on foreign portfolio investors could be a key stumbling block for getting added to other global bond indices such as Bloomberg’s.
Nevertheless, JPMorgan’s move could trigger inclusion in more such indexes that may bring about further flows into the market. The entry of Indian government bonds in global bond indices could not have come at a better time, with hopes that it will bolster the Indian rupee when there are concerns over the current account deficit weakening with oil prices expected to remain elevated.
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