What is the Impact of India’s Inclusion in the JP Morgan Bond Index

  • Bonds Analysis
Aayush Khanna - Investing.com

The talk of the town is that investment bank JP Morgan Chase (NYSE: JPM ) & Co. finally decided to include Indian government bonds in its emerging markets debt index. This has been a long pending decision and even 1 year back there was a possibility of happening the same but the investment bank refrained from doing so back then.

But this latest decision has cheered the broader markets and so much that, despite the Gift Nifty’s 70-point cut at one point, the Indian counterpart opened the session on a slightly positive note, going against all global markets.

So why is it such a big news and what does it mean for investors?

Firstly, it will increase foreign inflows in the country as passive funds that mandatorily have to invest in all constituents of the index will have to purchase Indian bonds as well. There’s no escape here. This will definitely increase foreign investments coming into India.

Just like you need dollars to purchase US bonds, you need rupees to purchase Indian bonds (obviously!). The demand for Indian bonds will likely boost the demand for the rupee as well, leading it to strengthen against the dollar. In fact, the rupee opened today’s session with 27 paise stronger on the back of this cheering news.

Including a country in such a prestigious index increases its credibility on the international platform. This will help Indian borrowers borrow with lesser interest rates, which further curbs the outflow via interest payments. And here again, foreign payments need to be made in dollars, and if this interest reduces, it will also strengthen the rupee.

The participation of big funds in the Indian market will also support the liquidity in the bond market here, which is not so good as of now.

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  • kadar supermarket @kadar supermarket
    how much higher do you feel pnb gilts will go after this news. do you have a target that you can give
    Like 1
  • Ashok Tiwari @Ashok Tiwari
    Can you pinpoint stocks which will be benefit maximum from this
    Like 0
    • Aayush Khanna @Aayush Khanna
      PNB Gilts
      Like 0

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  • Ashok Tiwari @Ashok Tiwari
    overall it will decrease the borrowing cost of govt and corporates. Banks who are today stuffed with govt bonds will start getting higher margin on their g sec
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  • sandeep ahuja @sandeep ahuja
    Wow! Nice to hear.
    Like 1
  • LK Awasthi @LK Awasthi
    good commentary and summation of facts.
    Like 1
  • namami ghosh @namami ghosh
    excellent💯👍👏
    Like 1
  • NIRAV JARIWALA @NIRAV JARIWALA
    BANK NIFTY 44000 CALL   850 ME  1 LOT BUY STOP LOSS ON 700 INTRADAY OR BTST
    Like 0
    • Harsh Patil @Harsh Patil
      I took bank nifty 45400 CE wt will it impact it will rise or fall in these coming week
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  • Sunil Goswami @Sunil Goswami
    What do you mean by "all constituents of the index"? please clarify.
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    • Rajinder Choudhuri @Rajinder Choudhuri
      It means all 50 stocks that form part of NIFTY50 and all 30 stocks that are part of SENSEX
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    • Aayush Khanna @Aayush Khanna
      All securities that make up the index.
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  • Dharamvir Waliya @Dharamvir Waliya
    dharamvir
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