The entry of foreign investment funds into India has been one of the most marked recent trends in the market.  Up until recently, India was seen as either too risky, too bureaucratic or too inconsequential to pique the interest of the world's most well-know funds.  Since September 2023, market activity by foreign investment funds in India has significantly increased, especially in government bonds.  As part of wider efforts to make India an easier place to do business, the Securities and Exchange Board of India (SEBI) are now working on simplified registration rules for foreigners investing only in government bonds.

This has the potential to impact the market in several ways:

• It can open up the market for Indian government bonds to a wider pool of investors, potentially impacting pricing and long-term prospects for these bonds;
• Depending on performance of the underlying assets, this could lead to an overall improvement in India's sovereign credit rating;
• It illustrates a wider change in the Indian regulatory landscape, with a willingness to engage with market entrants and create simpler rules; and
• It could lead to a growth in foreign investment irrespective of asset class and beyond government bonds alone.

Clearly these plans are still at an early stage, but these signals from SEBI show that there is great potential for the Indian market to take stock of recent positive signs from foreign investment funds and create a pathway for greater foreign investment.  Along with others in the market, the Reed Smith India business team will be watching what happens next with interest.