Indian bonds are likely to get $100 billion of foreign inflows in the coming years, due to global bond index inclusion, according to HSBC Asset Management. The inclusion of Indian bonds into global indexes may trigger inflows of as much as $50 billion and a similar amount of flows is also expected from large institutional investors, sovereign wealth funds and pension funds.
As per Bloomberg, India has become a favorite market for Wall Street investors, attracted by one of the world’s fastest rates of economic growth and as it positions itself as an alternative to China. Meanwhile the global funds remain light on holdings as foreigners own only 2% of the government bonds.
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“India really stands out as a fairly attractive destination for a strategic allocation from various large institutional investors,” Shriram Ramanathan, chief investment officer of fixed income at HSBC Asset Management’s India unit told Bloomberg. “People start appreciating some of the nuances and the risk returns that it has delivered over the last five and 10 years which make it an extremely attractive proposition.”
India's trillion dollar sovereign bond market is also looking at a foreign money inflow rush as it is set to be included in JPMorgan Chase & Co.’s emerging markets bond index in June. Meanwhile, Bloomberg Index Services Ltd., as launched a consultation to solicit feedback on the proposed inclusion of India’s Fully Accessible Route, or FAR bonds in its emerging market local currency index. FAR bonds are securities that have no investment curbs for foreigners.
India’s 10-year bond yield at 7.17 per cent are the highest in emerging Asia.