A pivotal week for Indian traders could pave the way for foreign entry

(Bloomberg) – Indian investors face a pivotal week with announcements on a review of the country’s key bond index and also the government’s borrowing plan for the next six months.

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FTSE Russell will announce its annual review of the equity and fixed income markets on Thursday, with Indian debt already on a watch list for a possible upgrade. While the government has yet to announce when it will announce its next borrowing program, central bank and finance ministry officials will decide on the plan on Monday, people familiar with it.

“This week will lay the groundwork for the second half of the year and could be an inflection point for the markets,” said Madhavi Arora, chief economist at Emkay Global Financial Services Ltd. in Mumbai. “The inclusion of bond indices could be a game-changer for India, attracting massive inflows of foreigners.”

The rupee has fallen around 1% this month so far and is among the worst performers in Asia as the Fed’s hawkish pivot has strengthened the dollar, although the Reserve Bank of India has maintained its position accommodating. A potential inclusion of FTSE Russell could pave the way for significant foreign inflows and make the rupee and bonds shine.

The rupee looks poised to take more short-term losses against the greenback given the sluggishness of the currency pair’s stochastic, an indicator of momentum, signaling that it is still not in oversold territory against the dollar. dollar. However, any further loss may be limited given the initial rupee support around the 74 level.

Indian bonds are already heading for the biggest monthly gain since April and could get a boost if the government decides to cut borrowing for the second half of the year as incomes improve.

READ: Index Inclusion Buzz lures foreigners into Indian bonds

The addition of the index seems more imminent after a finance ministry official said earlier this month that the country had completed most of the work required to be part of the global benchmarks.

India’s inclusion in global bond indices, expected by early 2022, could attract up to $ 250 billion in inflows over the next decade, according to Morgan Stanley, which sees bond yields at 10 years decrease to 5.85% in 2022 against 6.18%. Friday. The move could cause the rupee to rise more than 1.5% to 72.50 per dollar, from Friday’s close, according to HDFC Securities Ltd.

Indian bonds are also under review for inclusion by JPMorgan Chase & Co., which typically rates its index this month, while Bloomberg Index Services Ltd. said last week that there is currently no estimated timeframe for India’s inclusion in the Bloomberg Global Aggregate Index.

Inclusion in an index “could be an important trigger, leading to a rapid appreciation of the rupee,” said Dilip Parmar, analyst at HDFC Securities. “The central bank may not be too aggressive in buying or selling dollars, and may allow the rupee time to adjust to the market.”

Bloomberg LP, the parent company of Bloomberg News, is also the parent company of Bloomberg Index Services Ltd., which administers indices that compete with those of other providers.

Here are the main Asian economic data expected this week:

  • Monday September 27: Taiwanese industrial production

  • Tuesday September 28: Retail sales in Australia, industrial profits in China, consumer confidence in South Korea, Malaysia’s trade balance

  • Wednesday September 29: Bank of Thailand rate decision

  • Thursday September 30: Chinese manufacturing PMI, non-manufacturing PMI and Caixin manufacturing PMI, building permits in Australia, business confidence and building permits in New Zealand, retail sales and industrial production in Japan, business tendency surveys and industrial production in South Korea, India BoP Q2 current account balance, Thailand trade and current account data

  • Friday October 1: Tankan 3Q survey in Japan and manufacturing PMI, mortgage loans in Australia, consumer confidence in New Zealand, trade data in South Korea, CPI in Indonesia, business sentiment in Thailand

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