10 Points Of India’s Inclusion In The Global Bond Index
The Indian government has ruled out the long-standing demand for the inclusion of nation’s bonds to be included in global indexes by denying any changes to tax policies.
10 Highlights Of The Big Story
- The government has no plans to waive capital gains taxes and it is concerned about foreign flows increasing the volatility of local markets.
- Predictions of $30 billion of foreign inflows through bonds were dashed with the government’s decision to levy capital gains. But the index compliers have the option of including securities without changes.
- Pankaj Pathak, a fixed-income fund manager at Quantum Asset Management Co., said that the benefits might outweigh the concerns because Indian bonds would diversify the index, boost the yield, and expand the market opportunities.
- India holds the third largest bond market in the emerging world but it is yet to be included in the global indexes.
- Since the local banks and foreign investors boosted their holdings in June, the country’s benchmark 10-year bond yield witnessed a drop of 30 basis points.
- The yield witnessed a further decline of 7 basis points to 7.29% on Tuesday.
- According to experts, inclusion could lead to billions of dollars of inflows as money managers often track global indexes before making allocation decisions.
- The experts further said that the government wanted to be self-reliant in its funding, and was prepared to manage any selloff in its debt market if inclusion failed to happen.
- According to a JPMorgan investor survey, investors wanted India to replace Russia which was excluded from the indexes after it invaded Ukraine.
- JPMorgan is likely to index India’s bonds early next year as the Indian government still needs time to address operational issues.