India Bond Inflows Rise Ahead of Possible Bloomberg Index Inclusion

According to CNBC, foreign investors are becoming more positive on Indian bonds ahead of a possible addition to the Bloomberg Global Aggregate Bond Index, even as they have sold Indian stocks this year. India scrapped tax on overseas bond investors last month, and the actual index inclusion is expected in early 2027. Ashish Vaidya, head of treasury at DBS Bank, said India could get a weight of about 0.7% in the index, which he estimated would lead to $25 billion to $27 billion in flows by fiscal 2028. Foreign investors have bought $7.7 billion of Indian debt so far this year, exceeding the $6.6 billion they bought in all of 2025, according to data from Indian depository NSDL. Of that total, $5.8 billion came in June after India cut the 12.5% long-term capital gains tax and the 20% withholding tax on interest income for foreign investors buying government bonds. At the same time, foreign investors sold $27.6 billion of direct equities in 2026 so far. HSBC said expansion of the fully accessible route bond universe to longer maturities could attract foreign insurance and pension funds with longer-duration demand.