The Indian rupee on Friday opened 27 paise higher against the US dollar after JPMorgan announced that India will be included in the emerging market bond index. JPMorgan Chase & Co. has said Indian government bonds (IGBs) will be added to its benchmark Emerging Market index starting June 28, 2024. Following this, the domestic currency opened at 82.82 a dollar as compared to the previous close of 83.09.
The 7.18 per cent 2033 Government Bond yield opened at 7.08 per cent versus Thursday’s close of 7.14 per cent. On Thursday, the rupee depreciated marginally to end 2 paise lower at 83.09.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 105.48, up 0.12 percent from its previous close of 105.36.
The inclusion of bond carries substantial implications for India’s debt market and global investors, with India’s weight in the index limited to a maximum of 10 per cent and eligible Government bonds valued at $330 billion, as per experts.
In its note, JPMorgan said: “India is expected to reach the maximum weight of 10 per cent in the Global Diversified index (GBI-EM GD).”
The inclusion of the IGBs will be staggered over a 10-month period from June 28, 2024, to March 31, 2025, implying an inclusion of 1 per cent weightage per month.
JPMorgan noted GBI EM-Global Diversified index accounts for $213 billion of the estimated $236 billion benchmarked to the GBI-EM family of indices.
Last month, Morgan Stanley had estimated that Indian bonds could be included into two out of the three global bond indexes, including a JPMorgan developing market gauge, driving inflows to the tune of nearly $40 billion.
“India’s inclusion in bond index is a step in the right direction. With the exclusion of Russia and troubles in China, the options for global debt investors have narrowed down. Hopefully, rating agencies will respect investors view point and give up on their moody and poor standards. This inclusion will deepen bond market in India,” said Nilesh Shah, Managing Director at Kotak Mahindra AMC.
“I believe it is after waiting for 10 odd years India has finally been included in the JP Morgan EM Bond Index today effective 28th June 2024. The credit goes to the Govt of India regulator as well as various government organisations who made this possible in the current scenario. The news has come at the right time when the market is under pressure and hereafter the possibility of larger FPI flows could be seen ahead of this inclusion. The Rupee would also benefit from this news. We continue to remain optimistic on a great Indian long term story. Equity markets would take this as a welcome note at the right time,” said CA Rakeshh Mehta, Chairman, Mehta Equities – Mehta Group.
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