Goldman sees India getting bonds added to index

NEW DELHI: Indian government bonds may be added to a global index next year, triggering passive inflows of about Us$30bil (Rm134bil) that will help the country to finance its current account and fiscal deficits, says Goldman Sachs Group Inc.

The nation’s sovereign bonds may be added to Jpmorgan’s GBI-EM Global Diversified bond index with an initial 10% weightage, analysts Danny Suwanapruti and Santanu Sengupta wrote in a note to clients.

India’s US$1 trillion (RM4.46 trillion) sovereign bond market is one of the biggest emerging markets (EMS) not part of a global index.

Goldman’s optimism comes even as the index inclusion has largely gone on the back burner after New Delhi desisted from making any tax changes for foreigners that would have helped Indian bonds settlement on international clearing platforms like Euroclear.

The analysts wrote that both Chinese and Indonesian government bonds, not Euroclearable, are part of the Jpmorgan index.

“Adding India, which is a large, deep and high-yielding market, would help to diversify as well as boost the average yield of the overall index,” the analysts wrote.

“Such a move would be beneficial to various stakeholders, including EM investors and the Indian government.”

Benchmark 10-year yields fell 11 basis points to 7.18% yesterday as the markets reopened after an extended weekend.

Account openings for foreigners are still cumbersome in India, but can be addressed by a longer lead time, according to the note.

The country has also made some progress on operational issues, like posting margin requirements and extended settlement timings, the analysts wrote.

Bloomberg LP is the parent company of Bloomberg Index Services Limited, which administers indexes that compete with indexes from other providers.