MUMBAI, Jan 24 (Reuters) - Indian government bonds could attract about $100 billion in the next three to five years, led by index and strategic allocations, while raising foreign investor ownership to 8%-9% of the total outstanding issuance, HSBC Asset Management (India) said.
The expectation stems from JPMorgan's September announcement to include certain bonds in its Government Bond Index-Emerging Markets and its index suite from June, which has led to inflows of around $6 billion in such papers.
"With operational issues getting sorted with smoother access and investors appreciating the various positive aspects that India bond markets have to offer, we believe large global institutional investors may start considering strategic allocations to Indian bonds," Shriram Ramanathan, CIO-fixed income said in a note.
Ramanathan expects $25 billion in inflows in the next financial year that starts in April.
Inclusion in other global bond benchmarks, such as the Bloomberg Global Aggregate Index, is likely to draw an additional $20-$25 billion, he added.
Foreign holding of bonds under FAR stands at around 3.8% of the outstanding issuance, according to clearing house data.
Foreign investors may start considering strategic allocations to Indian bonds, beyond their role as merely part of the emerging market index allocations, the asset manager said.
(Reporting by Dharamraj Dhutia; Editing by Dhanya Ann Thoppil)
