ICICI Bank sees $10 bn of flows before India's entry to global bond index

By Subhadip Sircar

India’s bond markets may see inflows of as much as $10 billion even before JPMorgan Chase & Co. adds the nation’s debt to its emerging market index in mid-2024, according to ICICI Bank Ltd.

As markets anticipate inclusion of the debt in other indexes, including the Bloomberg Global Aggregate, the flows could rise to $50 billion by the end of next year, B. Prasanna, group head for global markets sales, trading and research at the lender, said in an interview on Bloomberg Television Thursday.

JPMorgan last week said it would add India’s bonds in phases from June 2024, taking the maximum weight for the nation in the index to 10 per cent. The move is expected to drive yields lower, helping Prime Minister Narendra Modi fund record borrowings before next year’s national polls. 

Even though the bonds have not shown gains since the announcement, they have done “pretty well relatively and have been holding the pressure from all global macros,” said Prasanna, referring to rising crude prices and US Treasury yields.

Indian yields can drop to around 7 per cent levels once passive inflows start and global headwinds ease — for instance when crude prices start cooling off and the Federal Reserve drops its hawkish tone, he said.

The yield on the 10-year bond was up five basis points to 7.22 per cent on Thursday.

The rupee, which has been hovering close to its record low, will trade in a range of 82-84 against a dollar, Prasanna said. The RBI will continue to mop up the greenback and won’t allow much appreciation in the local currency, he added.

Bloomberg LP is the parent company of Bloomberg Index Services Ltd., which administers indexes that compete with those from other service providers.