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KEY EVENTS THIS YEAR

Impact on the Market

The inclusion would bring in estimated inflows of USD 30-40 billion to India. Post that an additional flow of USD 10-15 billion is expected from other index providers and active investors.

• So far, banks, insurance companies, EPFO, Provident funds and mutual funds have been the largest buyers of government debt. An additional source of funds will help cap bond yields and the government's borrowing costs.

• This could lead to reduction in cost of capital and in turn also benefit other asset classes.

• The potential foreign inflow will strengthen India’s balance of payment and deepen the market for INR.

• GOI can implement additional reforms and safeguard measures in coming months to deal with any outsized impact of large inflows/outflows. Greater Fiscal Discipline from the Government is expected in the coming years to maintain financial creditability.

JP Morgan included INDIA In Its EM Debt Index

JPMorgan Chase & Co. set to add Indian government bonds to its benchmark emergingmarket (EM) index.

• Assets worth ~ USD 240 billion track the JPMorgan emerging market bond index.

• Indian bonds will have a maximum weight of 10% on the index.

• Inclusion will be staggered over 10 months starting Jun 2024 till March 2025 at roughly 1% weight per month.

Impact on the Market

• 3 months Treasury Bills moved from 6.73 % to 6.95% as the overnight rates moved from 6.25% – 6.50% band to 6.75% from September 2023 onwards

• Yield curve flatten with the 1 to 10 year spread compressing to 10 basis point from 30 basis points after the demonetization.

• Core CPI inflation moves down to 4.1 percent and CPI inflation even after food spike comes back to RBI tolerance band of 4 to 6 percent

• Liquidity deficit moves above Rs 2 lakhs forcing RBI to do repo auctions of 7 days to inject liquidity in the system

• One year CD rates move from 7.40 to 7.90 levels , NBFC rates moves from 8.25 to 9.25 levels

Liquidity Controlling Measures

• I-CRR introduced first time after Inflation breached RBI target band, to a high of 7.4% in July 2023

• Withdrawal of 2000 Denomination notes

• OMO Sales

• Forex Sales

• Variable Rate Repo Auction

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