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India defers govt bond index inclusion to next year; $30 bln opportunity pushed back due to operational issues

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India has deferred the planned inclusion of the government bonds in the JP Morgan emerging market global index to next year, as was being speculated on the street. The bond inclusion in the global index may have been pushed back to early 2023, as the Government of India still needs to address various operational issues, Reuters reported citing unidentified sources. Earlier, Goldman Sachs and Morgan Stanley had predicted the bond index inclusion would happen only in the 2nd or 3rd quarter of the next year. The Indian government began considering listing its securities for an inclusion in global bond indices in 2013. However, restrictions on foreign investments in Indian debt meant that the country had to roll out a number of steps before its securities could be eligible.

Goldman Sachs said India bonds could be included in the index with a 10 per cent weightage, the maximum for a country in the index, resulting in potential inflows of $30 billion from the move. Meanwhile, Barclays also said India could possibly be added to the Bloomberg Global Aggregate bond index.

If successful, India would be the last major emerging market to be added to the JP Morgan index, according to Reuters. Earlier this month, Morgan Stanley estimated that India’s inclusion could result in additional flows of as much as $30 billion within 10 months into the Indian government bond market. Last year, Morgan Stanley predicted that it could generate $170 billion to $250 billion of inflows over the next decade. “Most of JPMorgan’s index investors are in favour of including India in the index, but think issues such as investor verification and settlement rules need to be ironed out first,” Reuters reported citing three unidentified sources.

Bonds listed on global indices are settled through international platforms, including Euroclear, outside a country’s borders. It may be noted that Russia’s exclusion from the JPMorgan gauges came after it invaded Ukraine. In the Government Bond Index – Emerging Markets Global Diversified, or GBI-EM index, Russia had a weight of about 8 per cent before it was removed, and now there are seven countries with a weight of 10 per cent each and 13 countries sharing the remaining 30 per cent, according to the Morgan Stanley note.

Earlier this month, Bloomberg noted that India was ‘on track’ to be placed on index watch for inclusion in JPMorgan’s bond index.

Will bears drag Nifty towards 17450 or bull rally to continue? 5 things to know before market opening bell

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Benchmark indices BSE Sensex, NSE Nifty 50 are expected to open in the red as trends in SGX Nifty indicate a negative opening for Indian equities with a loss of 80 points. “On Wednesday, FOMC and Bank of Japan would be announcing their interest rate decision followed by Bank of England on Thursday. If the Fed raises the interest rate by 75 bps in line with market expectation, then we can expect the positive momentum to continue, and Nifty may inch towards 18000. However Powell’s commentary would also be significant as it would give indication of the longevity of the rate hike cycle,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services.

Also Read: Share Market LIVE: SGX Nifty hints at negative start for Nifty, Sensex; Fed meet eyed, 75 bps rate hike likely

Technical view: A small positive candle was formed on the daily chart with gap up opening and with long upper shadow. Technically this signal presence of strong overhead resistance around 17900-18000 levels. The chart pattern could also indicate weak upside bounce in the last two sessions compared to recent weakness from the highs. The upside bounce of the last two sessions could be a relief rally after a sharp weakness from the highs. If Nifty fails to move above 17920 levels in the short term, then one may expect beginning another round of weakness from the highs towards 17450 levels, according to Nagaraj Shetti, Technical Research Analyst, HDFC Securities.

Levels to watch for: “The support for Nifty has shifted around 17600 levels while on the upside 17950 may act as an immediate hurdle. On the other hand, Bank nifty has support at 40700 levels while resistance at 41800 levels. Overall, the Nifty is looking volatile for an upcoming session. Pharma stocks rebound and look attractive for investment purposes,” said Palak Kothari, Senior Technical Analyst, Choice Broking.

Stocks under F&O ban on NSE: Delta Corp, Escorts, India Cements, PVR, and RBL Bank are the five stocks under the NSE F&O ban list for September 21. Securities thus banned under the F&O segment include companies where derivative contracts have crossed 95% of the market-wide position limit.

Also Read: ACC, Ambuja Cements, Adani Group, Wipro, Hero MotoCorp, Tata Steel, Central Bank of India stocks in focus

Oil prices fall: Oil prices extend losses on fears aggressive Fed rate hike will curb demand. Oil prices slid on Wednesday, extending the previous day’s losses, as investors braced for another aggressive interest rate hike from the US Federal Reserve that they fear could lead to recession and plunging fuel demand. Brent crude futures dropped 26 cents, or 0.3%, to $90.36 a barrel by 0040 GMT after falling $1.38 the previous day. US West Texas Intermediate crude was at $83.74 a barrel, down 20 cents, or 0.2%.