India's big yr for bonds starts with best Jan since 2019 on foreign inflows

By Ronojoy Mazumdar and Malavika Kaur Makol
 

Indian bonds capped their best January gain in five years, helped by accelerated foreign inflows ahead of the global index inclusion.
 

The yield on benchmark 10-year bond fell by three basis points to 7.14 per cent as foreign investors plowed $2 billion last month into securities eligible for inclusion into JPMorgan Chase & Co’s emerging market index from June.

The outlook for Indian debt has brightened amid hopes of foreign inflows of as much as $40 billion due to the index inclusion. Overseas investors will likely emerge as a key pillar of support for near-record borrowings for the next fiscal year due to be unveiled in Thursday’s federal budget. 

January’s gains are due to “incremental comfort from investors in terms of global and EM policy direction, and some pre-positioning flows ahead of actual inclusion,” said Aditya Gore, head of international coverage for fixed income at Nuvama Wealth Management.

Bloomberg Index Services Ltd. last month said it is soliciting feedback on a proposal to include India’s Fully Accessible Route, or FAR bonds, in its emerging market local currency index. FAR bonds are securities which have no restrictions for foreign investors, and are eligible for global index inclusion. 

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