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Investors Embrace Indian Debt Exposure
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Foreign investors are leveraging derivative proxies to invest in Indian government bonds in anticipation of their inclusion in major indexes, leading to $9.3 billion in net inflows. The use of offshore derivatives, such as total return swaps and rupee-denominated bonds, allows investors to circumvent local regulations and taxes. Notably, HSBC India has witnessed a surge in interest in these offshore instruments, while Vontobel opts for supranational bonds due to challenges in accessing the Indian bond market directly.
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How might the increasing reliance on derivative proxies impact the stability of the Indian bond market?
In what ways could the inclusion of Indian bonds in major indexes reshape global investment strategies and portfolio diversification?
What regulatory challenges could arise from the growing utilization of offshore derivatives in Indian debt investments?
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