India's inclusion in global bond index could spark higher FX volatility, bankers say

MUMBAI, Sept 22 - JPMorgan's inclusion of Indian sovereign bonds in its flagship emerging market debt index will likely increase the volatility in capital flows and in the rupee, bankers said on Friday.

"However, beyond that, the opening of the bond market means higher volatility and vulnerability for the rupee over the medium term." In times of high global uncertainty, investors tend to prefer safe haven assets like U.S. Treasuries and trim down allocations to the emerging markets. "One thing to have the bonds included you obviously get more forex but that will also mean a lot of volatility like we have seen in equities," said Madan Sabnavis, chief economist at Bank of Baroda.

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