Foreigners boost India corporate debt buying before govt bond index inclusion
28/05/2024 07:41
By Dharamraj Dhutia
MUMBAI, May 28 (Reuters) - Foreign investors are
increasingly being drawn to the traditionally overlooked
rupee-denominated corporate debt market in India as they gear up
for the inclusion of domestic government securities to a global
bond index next month, recent data showed.
While current investments remain modest, four bankers and
fund managers said they anticipate an uptick as more investors
familiarize themselves with Indian debt instruments.
"We have seen increased interest in Indian corporate bonds
from global fixed income investors as they get more engaged in
Indian markets," Siddharth Bachhawat, head of markets at
Barclays India said.
Foreigners have typically preferred to remain largely
invested in government bonds so far.
Indian government bonds are set to be included in the
JPMorgan Emerging Market local currency debt index from June 28,
with market participants anticipating passive inflows of around
$25 billion as a result.
Foreign investors have bought a net of 80 billion rupees
($963 million) in rupee-denominated corporate bonds since the
start of 2024 after remaining net sellers for six consecutive
years through 2023, with an aggregate sale of 1.06 trillion
rupees, depository data showed.
Buying activity has picked-up in shorter-duration bonds
issued by state-run entities such as REC and PFC, traders said,
with some experts foreseeing better liquidity as well.
Though currently there is no liquidity in the high yield
Indian corporate bond market, index inclusion would encourage
more flows, said Hui Sien Koay, lead index, fixed income
strategist for APAC at BlackRock.
This increasing interest is also making some overseas fund
managers consider launching exchange traded funds focused on
Indian corporate debt.
U.K.-based Tabula Investment Management, which currently
provides government bond exchange traded fund, has said they are
mulling a possible launch of corporate bond ETFs.
"We have been talking to investors about Indian corporate
bonds and may be this would be the next fund in our India
series. We might be looking at an Indian corporate bond fund
potentially, depending upon the success of IGB fund," Jason
Smith, CIO at Tabula told Reuters, without giving other details.
Apart from rupee bonds, investor demand has also stayed
robust for dollar bonds of Indian companies since the start of
2024, with companies having to shell out lower coupons than
their initial guidance.
($1 = 83.1110 Indian rupees)
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Indian corporate bonds witness foreign inflows in 2024 https://reut.rs/4aEyDTF
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(Reporting by Dharamraj Dhutia; Editing by Nivedita
Bhattacharjee)
((Dharamraj.Dhutia@thomsonreuters.com;))