India's banking sector sees significant surge following JPMorgan's inclusion of government bonds in benchmark index

The Indian banking sector experienced a significant boost on Friday, as stocks rose by up to 7%. The spike was led by Public Sector Undertaking (PSU) banks, following JPMorgan Chase&Co (NYSE:JPM)'s announcement to include Indian government bonds in its benchmark emerging-market index. This move is anticipated to direct billions in foreign inflows into India's debt market.

Union Bank of India spearheaded the rally, with its stock escalating 6.7% to reach a 52-week high of Rs 102.90. Indian Bank followed closely, witnessing a 4.6% increase in shares to a day's high of Rs 423.90. Other banks, including Canara Bank, Bank of Maharashtra, Bank of Baroda (BoB), Central Bank of India (CBI), Bank of India (BoI), Indian Overseas Bank (IOB), Punjab National Bank (PNB), Uco Bank, Punjab&Sind Bank (PSB) and State Bank of India (SBI), also saw their stocks rise between 3.81% and 1.67%.

The Nifty PSU Bank index reflected this positive trend, with all twelve stocks trading in the green around 9:45 am. The Nifty Bank index was also up by 224.65 points or 0.50%, trading at 44,848.50 with eleven advances and one decline.

This development highlights India's growing appeal to global investors as the country's economic growth outpaces its peers and its geopolitical influence expands. Global corporations like Apple Inc (NASDAQ:AAPL) are increasingly considering India as an alternative to China.

Despite foreign investors currently playing a minor role in the Indian bond market, inflows have been steadily increasing over recent years. The country's assets have shown resilience in the face of financial turbulence that has affected other developing nations.

The inclusion of Indian securities in the JPMorgan Government Bond Index-Emerging Markets is set to commence on June 28, 2024. India will be assigned a maximum weight of 10% on the index, as per a statement released on Thursday.

This decision follows the Indian government's launch of the FAR program in 2020 and substantial market reforms aimed at facilitating foreign portfolio investments. The decision was supported by nearly three-quarters of benchmark investors surveyed.

This achievement contrasts sharply with other emerging-market peers like China, which has been grappling with economic issues and struggling financial markets. These challenges have only served to enhance India's appeal in the eyes of global investors.

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