Abrdn to increase investment in Indian bonds amid index inclusion

“We’re very positive about India,” said Stephen Bird, chief executive officer of the firm that manages and administers £495 billion ($626 billion) in assets. Still, he sees the market facing some uncertainty ahead of the national elections starting next month.

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India’s debt market is poised to receive a significant influx of up to $40 billion in fresh capital, with JPMorgan Chase & Co slated to incorporate the nation’s bonds into its indexes starting June. Presently, foreign investors hold only a small fraction of Indian debt.

In addition, Bloomberg Index Services Ltd. will integrate select Indian bonds into its emerging market local currency index commencing next year. Bloomberg LP, the parent company of Bloomberg Index Services Ltd., oversees indexes that compete with offerings from other service providers.

Closing at 7.09% last Friday, the benchmark 10-year yield rebounded from a nine-month low of approximately 7% earlier in March. According to a Bloomberg survey of strategists, the yield could further decrease to 6.78% by the end of the year.

Overall, Bird expects emerging markets to perform better when the Federal Reserve starts its easing cycle. “When rates come off, which they will, that historically EM starts to do better and we think that investors need to prepare for that,” he added.

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Here are some more views from Bird: 

• Favors local-currency government bonds in Asia due to their “very good return,” in addition to investment-grade credit
• Less confident about high-yield because it’s “priced to perfection”
• Positive about tech stocks in Taiwan and Korea, which lead digitization and electrification; positive about Japan equities
• Monetary policy easing in South America offers good prospects in local-currency bonds in that region

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Published: 26 Mar 2024, 04:38 PM IST