January 17, 2019 (Reuters) - A treasury official at Standard Chartered predicted that India's net government borrowing in the upcoming fiscal year will probably stay mostly unchanged. The person also mentioned that foreign investors may take up to 25% of the supply, investing between $25 billion and $30 billion in government debt.

Parul Mittal Sinha, head of the bank's financial markets in India, stated, "The central government (is expected) to target a narrower FY25 fiscal deficit of 5.3%-5.6% of GDP, vs 5.9% in FY24, and this can lead to a net borrowing of 11.80 trillion to 12.20 trillion rupees ($142 billion-$146.83 billion)."

According to data from Clearing Corp of India, since October, foreign investors have purchased more than $5 billion worth of government bonds that are scheduled to be included in the JPMorgan emerging market debt index beginning in June 2024.

"The pace of foreign portfolio investment (FPI) inflows in debt has already increased and we expect the momentum to continue as we move towards June 2024," Sinha stated.
According to her, Standard Chartered sees moderate inflation, possible monetary policy easing, fiscal consolidation, and inflows tied to index inclusion as key catalysts for 2024 and is constructive on Indian government bonds (IGB).

By the end of June, Sinha anticipates that the benchmark 10-year yield will drop to 6.85% and the five-year rate would soften to 6.75%. On Wednesday, the yields were 7.03% and 7.16%, respectively.
"We expect global sentiment to turn positive on EM (emerging markets), Reserve Bank of India commentary to become more dovish in the upcoming Monetary Policy Committee meetings, and index inclusion related-inflows in IGBs to continue going into June."

Currently, 2.1% of all outstanding securities, or 2.14 trillion rupees, are held by foreign investors in bonds. This comprises 3.7% of the total outstanding issuance, or 1.41 trillion rupees, in bonds issued using the Fully Accessible Route, the majority of which will be included in the index.