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.

Investors Embrace Indian Debt Exposure