Indian Bonds in Demand as Global Stock Investors Seek Collateral.

India's sovereign bond market is becoming popular among foreign equity investors who are using the bonds as collateral for trade margin requirements. The inclusion of India's government debt in JPMorgan Chase & Co.'s emerging-market bond index has increased their acceptance as collateral. This development is appealing to overseas investors as they can now earn interest on their bond holdings. The combination of high yield, a stable currency, and the possibility of capital appreciation has created a new demand segment for Indian government securities. Foreign investors have invested 978 billion rupees ($11.7 billion) into index-eligible bonds since JPMorgan announced their inclusion last year. India has also attracted equity inflows of $2.6 billion so far this year, adding to net overseas investments of $21 billion in 2023. [Extracted from the article]