India’s rupee experienced a slight increase, yet government bonds did not see substantial gains on the day when the country’s sovereign debt was expected to be included in a prominent JPMorgan debt index. Investor enthusiasm waned as inflows fell short of expectations.
The rupee on Friday reached a peak of 83.3675 against the U.S. dollar and closed 0.1% higher at 83.3825. Concurrently, the benchmark bond yield saw a marginal increase to 7.01%.
Traders observed that foreign exchange market indicators had pointed to potential inflows, likely driven by passive funds buying bonds. However, they noted that the actual amount of inflows fell well short of expectations.
Initially anticipating up to $2 billion spread over Thursday and Friday, by 4:00 p.m. IST on Friday, traders estimated that only a maximum of 40 billion rupees ($480 million) had entered government bonds.
In the last trading session, bonds eligible under the fully accessible route, set to be included in the JPMorgan emerging market debt index, witnessed approximately $120 million in net purchases by foreign investors.
India’s entry into the JPMorgan index was announced in September, paving the way for substantial capital inflows into the world’s fifth-largest economy. Since then, foreign investors have purchased nearly $11 billion worth of government bonds through the fully accessible route.