Indian Bond Markets to Remain Stable in Near Term After JPMorgan Inclusion
BlackRock’s head of Asia Pacific fixed income, Neeraj Seth, expects Indian bond markets to remain stable in the near term after JPMorgan announced its inclusion in the widely tracked emerging market debt index.
Seth expects inflows of around $20 billion to $25 billion into India after the maximum weight threshold of 10% is achieved on the GBI-EM index. Given the size of the $2 trillion global government bond market, this is relatively small and is unlikely to have a significant impact on volatility.
Seth believes that foreign ownership of Indian government bonds will rise to 3.0%-3.5% post-inclusion. He does not think this is significant enough to move the markets around.
Foreign investor buying in Indian bonds has remained tepid so far in 2023, with net purchases of $3.4 billion. Foreign investors own less than 2% of outstanding government debt.
Seth also believes that there will be a shift in asset allocations as markets head into 2024, with investors looking to lock-in yields in U.S. fixed income and higher quality emerging market bonds.
Overall, Seth is optimistic about the outlook for Indian bond markets in the near term, despite the recent volatility in global markets. He believes that JPMorgan’s inclusion of India in its benchmark emerging market debt index is a positive development, but it is unlikely to have a significant impact on volatility. He also expects foreign ownership of Indian government bonds to increase gradually, but not enough to move the markets around.
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