Indian policy makers are in talks with JPMorgan Chase & Co. and other companies for inclusion of the nation’s debt in bond indexes to boost capital inflows, Reuters reported. The rupee surged.
Finance Minister Palaniappan Chidambaram and other officials plan meetings in the U.S. next week with fund managers including Pacific Investment Management Co. and Standard Life Plc, Reuters said without naming its sources. India may ease some restrictions on foreign purchases of its debt if necessary for inclusion, the report said. Reserve Bank of India Governor Raghuram Rajan said on Sept. 20 that talks would be held with index providers.
“An opening up of the bond market will lead to inflows,” said Paresh Nayar, head of currency and money markets at FirstRand Ltd. in Mumbai. “There is an expectation that some real developments are now happening after Rajan had flagged the possibility earlier.”
Lombard Odier Investment Management and Aletti Gestielle Sgr SpA say India needs to remove all restrictions in its bond market, and Standard Chartered Plc estimates that inclusion in JPMorgan’s GBI-Global Diversified Index could lure as much as $40 billion over 12 months. India caps foreign purchases of local-currency debt at $81 billion.
JPMorgan “cannot comment on market speculation,” Mumbai-based spokeswoman Beverly Mathews said in an e-mailed reply to Bloomberg. E-mails sent to the media teams at Pimco and Standard Life didn’t immediately get a response.
The potential meetings follow the announcement yesterday that International Finance Corp., the World Bank’s investment arm, plans to sell a record $1 billion of rupee bonds offshore to fund its investments. The move “should support investor confidence further,” Citigroup Inc. strategist Gaurav Garg wrote in a research report today.
Overseas funds have cut holdings of rupee-denominated bonds to $25.9 billion as of Oct. 9, official data show.
The rupee rose 0.9 percent today, reversing a drop of as much as 0.6 percent, according to data compiled by Bloomberg. The currency is still 10.4 percent weaker this year, weighed down by a current-account deficit.