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ICICI Bank predicts India’s bond market may receive up to USD 10 billion before JPMorgan incorporates the nation’s debt into its emerging market index in mid-2024. As the anticipation of debt inclusion in other indexes, including the Bloomberg Global Aggregate, grows, the flows might escalate to USD 50 billion by the end of the next year, as per B. Prasanna, the Group Head for Global Markets Sales at the ICICI bank. 

JPMorgan’s recent announcement outlines the phased inclusion of India’s bonds from June 2024, potentially lowering yields and aiding in funding record borrowings before the upcoming national polls. Despite the bonds not showing immediate gains post-announcement, they have demonstrated resilience amid global macroeconomic pressures, including surging crude prices and US Treasury yields, notes Prasanna.

Prasanna further envisions Indian yields dropping to approximately 7 per cent levels once passive inflows initiate, and as global challenges subside — such as a potential cooling off of crude prices and a shift in tone from the Federal Reserve away from hawkish policies. 

On Thursday, the yield on the 10-year bond experienced a five basis point increase to 7.22 per cent. Regarding the rupee, which has been in proximity to its historic low, Prasanna anticipates it to trade within a range of 82-84 against the dollar. He also expects the Reserve Bank of India to continue acquiring dollars, thus limiting substantial appreciation in the local currency.