India’s bond inflows slow after index inclusion
Foreign investments in India’s sovereign bonds declined for the second week in a row after the country was added to a major global bond index. Inflows into fully accessible route (FAR) bonds dropped to 35.9 billion rupees for the week ending July 5th.
This is down from 46.6 billion rupee the prior week. The slowdown comes after roughly 75 per cent of FAR bonds were added to JPMorgan Chase & Co.’s emerging market indexes on June 28th.
Analysts suggest that investors may have already prepared for India’s index inclusion, resulting in a decrease in inflows as attention turns to the country’s economic fundamentals.
Despite the recent slowdown, inflows remain above the six-month average of 21.7 billion rupee per week (as per Bloomberg calculations).
Market participants like Nathan Sribalasundaram, rates strategist at Nomura Holdings Inc., are optimistic about sustained demand for Indian bonds.
He believes pre-positioning wasn’t as significant as some may have anticipated, and expects continued onshore demand for long-term bonds.
India’s FAR bonds have seen consistent inflows for eight weeks, drawing in over $11 billion since their inclusion announcement in September.
Investment banks like Nomura and Goldman Sachs predict monthly inflows could reach $3 billion in the coming months as India’s weight in the index grows from one per cent to 10 per cent by March.
Attribution: Bloomberg
