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$10 Billion inflows: Foreign investors flock to Indian bonds ahead of key global index inclusion


Foreign investors are making a strong comeback to Indian bonds following an April sell-off, ahead of the debt’s inclusion into a major global index at the end of the month.

Since September, net inflows have surged to $10 billion. This follows JPMorgan Chase & Co.’s announcement of the inclusion, effective June 28. From June 1 to June 18, global funds bought a net 73.5 billion rupees ($881 million) in index-eligible debt. This follows May’s purchase of about 52 billion rupees, contrasting with April’s selloff of 98.3 billion rupees in Fully Accessible Route bonds.

The formation of a coalition government by Prime Minister Narendra Modi has contributed to cooling yields after a closely contested election. A robust dividend payment from the central bank to the government ahead of the annual budget is adding positive momentum. The 10-year government bond yield has decreased by eight basis points to 6.98%, reflecting investor confidence.

Further, Bloomberg Index Services Ltd. will include select Indian bonds in its emerging market local currency index starting next year, further boosting investor interest.

This resurgence in foreign investment highlights the growing confidence in Indian bonds, driven by global index inclusions and favorable political developments.

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