BlackRock aims to increase stake in India’s government bond market

• Vivek Mishra
• 15 May, 2024

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By: Vivek Mishra

BlackRock aims to increase its stake in India’s £396 billion fully investible government bond market through newly introduced exchange-traded funds (ETFs).

These bonds, accessible through the Fully Accessible Route (FAR) with no foreign investment limits, will be part of JPMorgan’s emerging market debt index from June, attracting foreign money managers’ interest.

Hui Sien Koay, lead index, fixed income strategist for APAC at BlackRock, told Reuters on Wednesday that globally, ETFs hold about 2 per cent of outstanding bonds, and BlackRock commands a nearly 40 per cent market share in fixed income ETFs.

“If we consider that as a barometer, and the total (India) FAR bond market size, it stands at around £396 billion, which is our opportunity set, and if we consider 2 per cent of that, it would be a realistic commercial goal for us (as an industry),” she said.

BlackRock introduced its India bond ETF in February, managing £20.63 million in assets currently, offering the lowest fees among peers, with a weighted average yield of 7.14 per cent.

BlackRock’s expertise in navigating complex markets like India aids investors in areas such as trade execution and taxation, Koay added.

India’s inclusion in global bond indices, a topic of discussion for nearly a decade, faced hurdles such as restrictions on foreign investors and local taxation.

Over the next eight months, Indian bonds will be integrated into JPMorgan and Bloomberg’s emerging market debt indices, while FTSE Russell is yet to include domestic bonds.

India’s favourable macroeconomic conditions, including high growth, a stable currency, and comparatively higher yields, make it an attractive investment destination, Koay noted.

“Since the rupee has been relatively stable, we are quite sanguine about it, because it has got a lot of tailwinds, so we are bullish for now (on India),” she said.

BlackRock is attracting investors through marketing campaigns that emphasise investment options across various asset classes, with India being a key priority theme for this year, Koay added.

(Reuters)