India’s government is working with JPMorgan Chase & Co. to potentially include its bonds in the firm’s global indexes.
By Kartik Goyal and Siddhartha Singh
India’s government is working with JPMorgan Chase & Co. to potentially include its bonds in the firm’s global indexes, according to people with knowledge of the matter. India is aiming for a 7% weighting in indexes tracked by global investors, one of the people said, without elaborating and asking not to be identified citing rules. Details haven’t yet been finalized and may change. Inclusion in global indexes could attract billions of dollars into Indian debt, at a time when public finances are deteriorating. India’s economy is set to contract this year for the first time in decades as the coronavirus pandemic hits demand. Moody’s Investors Service downgraded the nation’s ratings this month to the lowest investment-grade level.
“While it’s good news, it remains to be seen how soon the turnaround happens in foreign inflows given the huge global uncertainty,” said Naveen Singh, head of fixed-income trading at ICICI Securities Primary Dealership in Mumbai. “In the long run, we may see huge inflows, but right now the huge supply of bonds and concerns about a wider deficit doesn’t pose a happy situation.” There’s also the geopolitical risk that traders have to contend with. The yield on most-traded 6.45% notes rose seven basis points to 6.04% on Tuesday after reports of escalation of border tensions with China. The rupee erased gains and fell 0.1% to 76.1350 per dollar, while the S&P BSE Sensex of stocks surrendered an intra-day advance of 2.4% to trade little changed at 1:29 p.m. in Mumbai.
India’s government in March opened up a wide swath of its sovereign bond market to overseas investors, taking its biggest step yet to secure access to global indexes. That plan has so far attracted 182.6 billion rupees ($2.4 billion) of inflows.
A 2013 attempt at inclusion into JPMorgan indexes had fizzled out when Indian officials resisted the removal of the cap on foreign ownership. Representatives for JPMorgan didn’t immediately reply to two phone calls and a text message seeking comment. An Indian Finance Ministry spokesman couldn’t immediately be reached for comment. The idea of tapping the global debt market more aggressively was floated in September when Indian Prime Minister Narendra Modi was in New York. Bloomberg LP, the parent company of Bloomberg News and Bloomberg Barclays Indices, announced it would help Indian authorities navigate a course to inclusion in international bond benchmarks.
Inclusion into global bonds “would give a big boost to foreign flows,” said Abhishek Kumar, the London-based head for emerging markets at State Street Global Advisors. “While the ratings downgrade is a cause of concern, as long it does not deteriorate further and the government continues to open up the bond markets, the index providers would be willing to consider India’s inclusion.”