India’s upcoming inclusion in JPMorgan Chase & Co.’s emerging market gauge is not just a milestone; it’s the beginning of a transformative journey for the nation’s debt market. HSBC Holdings Plc, among other custodians, is playing a pivotal role in facilitating this transition by engaging with over 200 overseas funds to help them establish their presence in India ahead of the index inclusion in June.
Preparing for India’s Sovereign Debt Inclusion
As India gears up for its sovereign debt to be added to global indexes, such as JPMorgan’s, HSBC is assisting global investors with registration and other formalities. This proactive approach by the bank underscores the importance of index inclusion and the potential impact it could have on the nation’s debt market.
Anita Mishra’s Insight: The Beginning of a Journey
Anita Mishra, head of markets and securities services for HSBC India, highlighted that the bond index inclusion is just the starting point of the journey. The bank is conducting road shows and meetings with funds in London, Hong Kong, and the US to promote the “India story” and attract investment interest.
Significance of India’s Weighting in the Index
India’s maximum 10% weighting in the JPMorgan gauge makes it crucial for funds tracking the index to add the nation’s debt to their portfolios. This inclusion is expected to bring in as much as $40 billion in inflows, presenting a significant opportunity for banks and money managers.
Challenges and Solutions: Onboarding Onshore
As passive money starts to flow in, investors will need help with “onboarding onshore,” which is a major focus for HSBC. The bank is leveraging its foreign portfolio investor license in GIFT City to offer total return swaps, allowing overseas investors to gain exposure to India without setting up local operations.
Market Accessibility and Regulatory Progress
Despite the progress, challenges remain for foreign investors looking to enter the Indian market, including heavy documentation processes, margin requirements, and restrictions on moving money out of the country. Regulatory improvements, such as a common application form and the use of digital signatures, are steps in the right direction.
Conclusion: A New Chapter for India’s Debt Market
India’s inclusion in global debt indexes marks a significant milestone for the nation’s debt market. HSBC’s proactive approach and efforts to assist global investors highlight the potential for growth and development in India’s debt market.
