Bond investors risk getting burned if India fails to enter global indices
Published On: Thursday, September 15, 2022 | By: Team KnowMyStock
If a long-awaited inclusion into global indexes once again fails to take place the overseas investors investing into into Indian bonds are at a risk of losses. Bond purchases by global funds under the so-called Fully Accessible Route jumped to 42 billion rupees ($529 million) in August, the most since January. They have already snapped up an additional 31 billion rupees of the securities in September. The inflows have added fuel to a bond rally driven by optimism that JPMorgan Chase & Co. will announce the inclusion of Indian debt in its emerging-markets index as early as the middle of this month. Any disappointment may damp sentiment and lead to a selloff, according to Quantum Asset Management Co..
India’s benchmark 10-year yields have dropped about 50 basis points from their June high of 7.62%, to close at 7.12% yesterday. In contrast, similar-maturity US Treasury yields jumped about 40 basis points since the end of that month.
“The only thing driving the Indian bond market is the index-inclusion theme,” said Pankaj Pathak, a fixed-income fund manager at Quantum Asset in Mumbai.
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