Bond Street to see $2-3 billion foreign inflows a month after inclusion in JP Morgan Index

JP Morgan index this week, with the pace likely to accelerate once the US starts cutting rates, Standard Chartered Bank's India head of financial markets said.

«We have a different profile spread across clients. There are real money clients who may be investing in India off-benchmark. Then there will be the passive index trackers who will be the regular ones coming each month and we may see some large allocations come in intermittently. So, around $2-3 billion per month is what we expect,» Parul Mittal Sinha, head — financial markets, India & co-head, macro trading, ASA, Standard Chartered Bank, told ET.

Indian bonds will be included in JP Morgan's GBI-EM Global index suite starting June 28 and are expected to reach a weight of 10% over a 10-month period. In a recent note, JP Morgan's officials said that assuming an index-neutral position, foreign investment worth $20-25 billion could flow to Indian bonds following index inclusion.

Providing a view on how foreign flows may shape up if the Fed were to deliver a much-sought-after rate cut this year, Sinha said that the event would finally propel developed market flows into emerging markets after a two-year drought.

«If the Fed starts cutting, the one-time allocations, the fast-money names, they will definitely want to make use of that opportunity to enter (Indian bonds) ahead of normal flows. That will have a positive effect on all Asian markets as the DXY (dollar index) starts to normalise,» she said.

Standard Chartered Bank's research team estimates two rate