Indian rupee expected to strengthen

MUMBAI: The inclusion of Indian bonds in JPMorgan's benchmark emerging market index is expected to boost investor sentiment and strengthen the Indian rupee. This decision will certainly increase the base of investors investing in Indian government bonds.

JP Morgan has announced the inclusion of Indian government bonds or government securities in its benchmark emerging market index from June 2024. Due to this, the borrowing cost of the government is likely to decrease, said government sources.

There is no need to assume that inclusion in the index will lead to volatility in the currency market, Chief Economic Adviser V Ananth Nageswaran said while speaking to reporters.

The inclusion of bonds in the index is also likely to strengthen the Indian rupee.

Long-term investors in government securities will benefit from this. He opined that due to this decision, not only the investor level of Indian government bonds will increase, but Indian financial institutions will also get relief from buying government bonds in bulk.

The liquidity left by financial institutions can be channeled into other productive sectors. With inclusion in the index, demand for Indian bonds from global investors will increase. There will be no lock-in period for the securities covered by the index. Meanwhile, the inclusion of India's government bonds in JPMorgan's emerging markets index from next year will widen the investor base and could strengthen the rupee, said V Ananth Nageswaran, chief economic adviser.

He said that this decision by JP Morgan will give Indian financial institutions an opportunity to be freed from the obligation to buy government bonds and they can use the proceeds to allow the private sector to do more productive work.