by Tania Chen and Ronojoy Mazumdar

JPMorgan Chase & Co will include India’s sovereign bonds in its index next year as investment bottlenecks are resolved, one of Europe’s largest asset managers said.

“According to our meeting with the index provider, India is eager for that inclusion, even if it doesn’t look like it from the outside,” said Sabrina Jacobs, senior client portfolio manager of emerging market fixed income at Pictet Asset Management SA. an interview. “We are looking at mid-2024 as the beginning of inclusion and then a phase one.”

In recent years, India has moved closer to opening its $1 trillion sovereign debt market to more global funds before pulling back from meeting index inclusion requirements. It is the last major emerging market in the world not to have joined other markets such as China on the international stage, with policymakers worried about hot money flows.

Morgan Stanley estimated that India’s inclusion in two of the three global bond indexes, including the JPMorgan Developing Market Gauge, would result in inflows of $40 billion. A spokeswoman for JP Morgan declined to comment, while the finance ministry did not respond to an email seeking comment.

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JP Morgan is expected to present the results of its index review by October. Last year, it had said investors wanted a resolution to issues such as the lengthy registration process and operational preparation required for trading, disposal and custody of onshore assets.

Despite operational difficulties, the provider could move forward with inclusions to diversify index components, strategists at Bank of America said last month. Russia’s invasion of Ukraine saw the index decline, while geopolitical tensions have made China’s sovereign debt less attractive.

As India’s index inclusion hopes resurface, foreign investors have bought $3.8 billion of index-eligible bonds, or fully accessible route (FAR) notes, this year, nearly double the inflows through 2022 Is. The yield on 10-year government notes has fallen 12 basis points this year to 7.20%.

The flow will help bring down borrowing costs, which will support Prime Minister Narendra Modi’s infrastructure spending plans to spur economic growth.

“It is definitely an economy that is doing very well and the growth is largely domestically driven,” said Jacobs, who likes the fund and owns India bonds.

Bloomberg LP is the parent company of Bloomberg Index Services Ltd., which manages competing indexes along with other service providers.


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