ETMarkets Fund Manager Talk: JPMorgan bond index inclusion, likely peak rate hike cycle to drive debt fund inflows: Canara Robeco MF

economictimes.indiatimes.com:

Global investment bank JPMorgan’s decision to include Indian government bonds into its emerging market bond index is expected to be a game changer for the bond market, and a spillover effect will be seen in debt mutual funds as well. The inclusion in the bond index will channel global passive debt flows in India, as passive funds, by nature, are longer term, says Avnish Jain, head-fixed income, Canara Robeco Mutual Fund.
Expectations of large FII inflows due to the bond inclusion and rate hike cycle peaking in both local and global markets should start attracting inflows into debt funds, Jain said. In an interview with ETMarkets, Jain highlighted the significance of the bond inclusion, the inflows outlook, and the asset allocation strategy for debt fund investors. Edited excerpts:

Let’s begin with the hot topic today. What changes for India’s bond market with the JPMorgan bond index inclusion? The inclusion in the JPMorgan bond index is a game changer for the Indian government bond (IGBs) markets. While FII investments have been allowed in IGBs for a long time, they were more active and selective in nature, depending on the overall macroeconomic situation as well as relative attractiveness of the Indian debt market within the EM space.
The inclusion in the bond index will channel global passive debt flows in India. Passive funds, by nature, are longer term and generally fluctuate only in case of change in weightage in the index.

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