India bond exchange-traded funds (ETFs) likely to draw billions as Amundi, BlackRock join race

Major exchange-traded fund (ETF) providers are competing for the anticipated billions of dollars expected to flow into Indian bonds as they are included in significant global indices. BlackRock Inc., Amundi SA, and Janus Henderson’s Tabula Investment Management have launched new ETFs since JPMorgan Chase & Co. decided to incorporate Indian debt into its key emerging-market index last year. Asset management firm DWS Group estimates these ETFs could attract US$ 5 billion to US$ 10 billion over the medium term. Global head of ETF, Mr. Benoit Sorel, indexing and smart beta at Amundi, emphasised India's growing significance, stating, “India is too big to ignore. It’s becoming a key allocation within emerging-market debt.”

India’s weight in JPMorgan’s emerging-markets bond index will increase to 10% by March from the current 4%. The securities will also be included in developing-nation debt gauges owned by FTSE Russell and Bloomberg, potentially bringing billions into a market primarily driven by domestic investors, which has remained largely insulated from global volatility due to low foreign ownership. Indian rupee-denominated government bonds offer the highest yields in Asia, attracting US$ 15.7 billion in inflows this year, the second most in Asia after China, South Korea, and Japan. However, some experts caution against investing in Indian debt, citing overcrowding in the market. Mr. Hui Sien Koay of BlackRock noted that ETFs can help investors bypass bureaucratic hurdles, making them an accessible option.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.