KARLO DUNIYA MUTTHI MEIN: Time to celebrate the Inclusion of IGBs in JP Morgan's Index!
After landing on the moon on 21st July 1969, Neil Armstrong declared- “That's one small step for man, one giant leap for mankind!"
On 21st September 2023, JP Morgan included Indian Government Bonds as part of their EM Bond Index.
This means more foreigners will buy Indian Bonds.
Well, that gives a typical ‘ Karlo Duniya Mutthi mein’ wala feeling, doesn’t it?
Till now, mostly domestic investors invested in government bonds. Though foreigners could buy these bonds, there were several restrictions including governmental control over the currency conversion process.
Interestingly, in the last 5 years, the government has clearly realized that an increase in foreign investment can help the nation fulfill its ambitions and emerge as a $5 trillion economy.
To strengthen the bond market, Bharat Bonds was launched for retail investors in 2019, followed by the RBI Direct Retail Portal in 2021. And finally, sincere efforts to make foreign investments easy!
In this context, the inclusion of 23 Indian Government Bonds worth about $ 330 billion in JP Morgan’s Emerging Market Government Bond Index is definitely a landmark achievement. And that too, a weightage of 10% which is the max allowed.
So, how will this benefit us?
Roughly 1,78,000 crores will come into India next year (from June 24 onwards, roughly 21.4 billion $)
Our Balance of Payment problem (We import more and export less) reduces as this brings $ into our country. So, lower inflation and hopefully Rupee Appreciation.
Our Interest rates should reduce with more buyers for our bonds. So, the benefit of lower EMIs for all.
This is just the beginning. After the inclusion into JP Morgan Index, we can certainly expect several more doors (Bloomberg or FTSE Russell) to open for our country.
Yeh to trailer tha, picture abhi baaki hai mere dost!
With Love,
Mohit.