What bond inclusions are the markets talking about? #India appears to be targeting inclusion into the #Bloomberg #Barclays Global Aggregate Index and JP Morgan's GBI-EM Global Diversified Index. Note here that the Bloomberg-Barclays index has an estimated passive AUM...(1/4)
...tracking of around $2.5tr and the #JPMorgan index around $250bn. Based on the above-mentioned o/s G-Secs held by foreign investors under the FAR, analysts estimate India to be given a weight of 0.3%-0.5% in the Bloomberg-Barclays index and 9.2%-10% in the JP Morgan...(2/4)
...index. In addition to the above, India is also on a watchlist to be included in the #FTSE EM-GBI index with a reported AUM tracking of $1.25tr. On Thursday last week, FTSE retained India on its watchlist for possible inclusion and mentioned that they were "encouraged...(3/4)
...by India's progress towards inclusion". If the FTSE index is included, analysts expect India to account for 1.2% of the index....(4/4)

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More from @arjungn80

4 Oct
The tax conclusion. Markets heard comments last month from India's Principal Economic Advisor Sanjeev Sanyal talking about how 99% of the bond inclusion work was through. What are the key issues that are pending then? They are largely tax related. Let...(1/5)
...us take a look at what they are. Indian government security investments are subject to two key taxes: #withholdingtax (WHT) and #capitalgainstax. WHT on coupons is currently at 5% (+cess+surcharge), meaning that this tax is deducted from the coupons received. And...(2/5)
...capital gains tax is 30% for short term (<36M) and 10% for long term (>36M). For a smooth inclusion into Euroclear (read: probably into indices as well), experts opine that India would probably need to do away with the capital gains tax on bonds due to some Euroclear...(3/5)
Read 5 tweets
4 Oct
What is #Euroclear then? Euroclear is a major global clearing house that settles and clears securities traded on European exchanges. While some commentators feel this is not a must for Indian bond inclusion into major indices, it is certainly seen as a big sentimental...(1/4)
...positive. This is because onboarding bonds on Euroclear means that foreign investors need not worry about registering with onshore authorities, opening onshore accounts, and taking care of tax norms for transactions in India bonds. This appears relevant because some...(2/4)
...market commentators expect Indian bonds to be listed on Euroclear by the end of this year, 2021. If a good part of the above comes through, analysts expect India's yield curve for government securities to flatten by around 50bps and the 10Y to trade around 5.85% in...(3/4)
Read 4 tweets
4 Oct
Indian governments have always been circumspect around foreign investment #debt markets. The taper tantrum was one such event that added to this discomfort. However, over the years, the current political dispensation has been very pro-active and disciplined in its...(1/7)
...approach towards the fiscal. In hindsight, its call to not stretch its finances during the #COVID19 phase, but deliver targeted measures, has worked very well for the country from the eyes of rating agencies. The last couple of years have witnessed a shift in attitude...(2/7)
...towards foreign investments in fixed income. A key stumbling block towards bond inclusion has always been the fact that India does not have an fully convertible capital account. This means that India does not allow local currency to be exchanged freely for foreign...(3/7)
Read 7 tweets
25 Aug
Will #India see an increase in cases like #Kerala? Kerala daily infections appear to have just seen an increase after its recent festival ended. This appears to have been just after a surge in mobility indicators. The festive season for India as a whole is set to start...(1/5)
...early October and extending into mid-November. Like seen in Kerala mobility indicators that have just near normalised are expected to see a sharp increase. If Kerala #COVID19 cases rise now, can one extrapolate this into India infections? One cannot say for sure. But...(2/5)
...if one were to go by the #seroprevalence framework tweeted earlier, it appears unlikely for the rest of India to follow a Kerala like surge. Do recollect here that in the sero survey, one state that recorded very lowest seroprevalence was Kerala (44%) and the highest...(3/5)
Read 5 tweets
23 Aug
One 'hawk' does not initiate normalisation. The markets were keenly awaiting the #MPC #minutes. And one can comfortably say that the details of what was discussed was hardly as hawkish as the markets had assumed soon after the policy. Prof.Jayanth Varma was the single...(1/12)
...dissenter in the August monetary policy. He voted against the status-quo accommodative policy on the following key counts. Firstly, he believed that the reverse repo rate must not remain at current levels (3.35%) and that a phased normalisation was warranted. He...(2/12)
...remained concerned of the #RBI continuing its accommodative policy given his expectation that COVID-19 would last for another 3-5 years. He sees inflationary pressures turning persistent and also views the adverse effects of the pandemic to only be limited to select...(3/12)
Read 12 tweets
11 Aug
China PMI weakness ahead? Following up on the quoted tweet, one zeroes in on #China's #manufacturing #PMI. Key Asian economies have seen weakness on the back of a rise in their #COVID-19 curves and related restrictions on activity. China has been experiencing multiple...(1/4)
...issues. The recent policy shock aside, from mid-July, China saw power outages, significant floods, all in provinces housing key manufacturing-hubs. Adding to this, the recent surge in COVID-cases have led to a string of lockdowns/restrictions across 14 provinces. While...(2/4)
...the extreme weather disturbances in July was expected to have dented China's production, the PMI manufacturing numbers were only marginally lower. Focus now shifts on August activity that is now expected to tag its Asian neighbours like Malaysia, Vietnam and...(3/4)
Read 4 tweets

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