Rupee to also gain from India entry into global bond index
global bond index and anticipation of more such announcements will likely bolster the rupee vis-a-vis its peers even as the probability of US interest rates remaining higher for longer theoretically dims the appeal of emerging market assets.
While the Reserve Bank of India is likely to absorb some of the dollar inflows and ensure competitiveness of exports, the stable influx of overseas funds is seen providing the rupee a cushion against a multi-year ascent in US bond yields and hardening crude oil prices.
Major dollar inflows on account of index inclusion are not expected for around six months but at a time when peer units such as the Chinese yuan and the Malaysian ringgit have been taking a beating against the greenback, the view on the rupee remains constructive.
«The inclusion of India in one of the major global indices is a clear medium-term positive — both from the flows perspective and additional inflows which it can bring in if other index providers also include India,» said Anubhuti Sahay, Standard Chartered Bank's Head of South Asia Economic Research.
Last week, JP Morgan said India would be included in its Government Bond Index Emerging Markets global index suite starting June 2024, a development that is expected to bring in over $20 billion of stable flows to India's sovereign bond market over two years. Following the move, traders hope for a similar announcement by the Bloomberg Global Aggregate Index.
«Between March 2024 and March 2025, we expect $20-25 billion only on the JP Morgan inclusion.
At that point in time, it's a clear positive. We have a broad range of 81-83/$1.
Read more on economictimes.indiatimes.com
