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Written by Dharamraj Dutia and Ankur Banerjee
Mumbai, March 12 (Reuters) – India’s stable exchange rate has been a key factor driving foreign capital inflows into the government debt market, and such investment is expected to continue as the South Asian country’s debt is added to global indexes. ing.
Foreign portfolio investors have increased their holdings in Indian government bonds by nearly 50% since September 21. JP Morgan announced the addition of India to its emerging market index.
Since the announcement, foreign investors have bought about 815 billion rupees (about $9.9 billion) in Indian government bonds, and sentiment was also boosted by the Bloomberg Index Service’s announcement last week that it would include bonds from 2025 onwards. supported.
indian rupee INR=IN The rupee has remained largely range-bound, with volatility dropping to its lowest level in nearly 20 years in 2023. The rupee has been the best performing Asian currency so far this year. “The main reason why other bond emerging markets have not done as well is because their currencies have been too volatile,” said Kenneth Akintowe, head of Asian sovereign debt at Singapore-based Abdon.
“You can get 12-14 per cent yield, but it disappears with a 20 per cent depreciation. If you look at the returns that the market is generating and adjust for risk, India is far ahead,” he said. Ta. The fund house has about $500 million exposure to Indian government bonds.
Foreign banks and investment managers led the Indian bond purchases in the past five months, adding Rs 216 billion and Rs 149 billion respectively, according to National Securities Depository data.
Meanwhile, global central banks’ bond holdings increased by Rs 78 billion, while sovereign wealth funds’ bond holdings increased by Rs 61 billion, data showed.
“They’re looking at hedged returns. Currency stability could generate higher returns,” said Neeraj Seth, chief investment officer and head of Asia-Pacific fundamental fixed income at BlackRock. Stated.
A stable currency allows investors to use a variety of hedging tools, not just non-deliverable forwards, Seth said.
Wontae Kim, a research analyst at Western Asset Management, said that apart from rupee stability, macro fundamentals and lack of political risk mean that “the stars are kind of cooperating with India. ” he said.
“We feel it’s a good time to be into government bonds, and we’ve been overweight duration for quite some time,” Kim said. Western Asset’s overall fund exposure to Indian debt is approximately $330 million.
(1 dollar = 82.7470 Indian rupees)
Foreign holdings of Indian government bonds have increased in the past 5 months https://reut.rs/4a9TSNi
(Reporting by Dharamraj Dhutia and Ankur Banerjee; Editing by Swati Bhat and Mrigank Dhaniwala)
((Dharamraj.Dhutia@thomsonreuters.com;))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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