Foreign Investors Snap Up Indian Bonds Set For Global Indices' Inclusion

Foreign investors have stepped up purchases in a clutch of Indian government bonds ahead of an anticipated inclusion in global bond indexes.

Foreign investors have stepped up purchases in a clutch of Indian government bonds that have no limits on foreign investment ahead of an anticipated inclusion of Indian debt in global bond indexes, analysts said.

The central bank removed foreign investment caps for a number of securities under the 'fully accessible route' (FAR) in April 2020 to help meet a key requirement of index providers.

"As far as the inclusion goes, the bonds under FAR will be a part of the index as there are no restrictions in that segment,” Ashish Agarwal, Asia head of foreign exchange and emerging market macro strategy research at Barclays, said.

"If they are the ones that would be included, we can expect a premium to build between the FAR bonds and other Indian government bonds," Agarwal said.