Global investors buying Indian government bonds to ride the
coattails of inclusion in a flagship debt gauge are likely to stay invested
rather than make a quick profit, Goldman Sachs' top local trader said.
India's debt yields are higher than those of China or the
United States, and its economy is the fastest-growing in the G20, giving active
investors who have already invested large sums of money little reason to change
course after the JPMorgan index inclusion takes effect.
Some active funds do come in early because they expect
passive funds to come in later and then they use the opportunity to exit the
position, but in India I don't think that's necessarily going to happen given
the good structure.
Indian Prime Minister Narendra Modi just won a third term in
office despite his party losing its parliamentary majority. India will eventually
get a 10% weighting in the JP Morgan index. We estimate that inclusion in the
index will attract nearly $30 billion in capital inflows to India, including
from active and passive investors.
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