Indian fund giants target inflow surge ahead of global index inclusion

As India’s bond market anticipates a pivotal year with potential inflows reaching $40 billion, fund managers are strategically positioning themselves to capitalize on the opportunities.

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Aditya Birla Sun Life Asset Management favours government bonds with maturities of seven to 14 years, anticipating higher returns compared to longer-duration notes. Bandhan Asset is focusing on Fully Accessible Route (FAR) bonds, which have no investment curbs for foreigners and are eligible for entry into JPMorgan Chase & Co.’s benchmark emerging market index.

SBI Funds Management Pvt. and ICICI Prudential Asset Management Co. are leaning towards short-tenor corporate bonds, particularly those with maturities of up to three years, offering better spreads over sovereigns. The fund managers are betting on potential inclusion in global bond indexes to drive returns, especially after the central bank dismissed speculation of an interest-rate cut. In 2023, Indian sovereign bonds witnessed their best annual performance in three years.