Indian bonds are likely to attract about USD100 billion of foreign inflows in the coming years, lured by the global bond index inclusion, according to HSBC Asset Management.

As reported by Bloomberg, the chief investment officer of fixed income at HSBC Asset Management’s India unit, Shriram Ramanathan, said in an interview that while inclusion into global indexes may trigger inflows of as much as USD 50 billion, a similar amount of flows is also expected from large institutional investors, sovereign wealth funds and pension funds.

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The monetary policy, inflation targeting, and the fiscal policy have helped build credibility over the recent years, and set up the performance of India’s economy in the coming years, he said.

Notably, India has become a favorite market for Wall Street investors, attracted by one of the world’s fastest rates of economic growth and as it positions itself as an alternative to China.

Foreigners own just 2 per cent of the government bonds, highlighting how global funds remain light on holdings.

Recently, data compiled by Bloomberg said India’s stock market capitalisation has overtaken Hong Kong’s for the first time as the country’s growth prospects and policy reforms make it an investor darling while global capital pours out of China.

The combined value of shares listed on Indian exchanges reached USD 4.33 trillion against Hong Kong’s USD 4.29 trillion.

Ramanathan further said India really stood out as a fairly attractive destination for a strategic allocation from various large institutional investors.

“People start appreciating some of the nuances and the risk returns that it has delivered over the last five and 10 years which make it an extremely attractive proposition.”

However, the Reserve Bank of India on Tuesday said the Net foreign direct investment (FDI) in India declined to USD 13.54 billion in April-November 2023 from USD 19.76 billion during the same period in 2022.

This decline was primarily due to a fall in global inflows and an increase in the repatriation of equity capital, it added.

According to data released by the RBI in its January 2024 bulletin, FDI in India amounted to USD 21.39 billion, while FDI by India, which represents money invested abroad from the country, reached USD 7.85 billion in April-November 2023.