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Global financial market evolution, the carry trade and India’s economic ascent

Global financial market evolution, the carry trade and India’s economic ascent
Investors looking for solid fixed income returns are the rupee, as the source of a lucrative carry trade across the $7.5 trillion daily churn in global capital markets.

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India's growing role in the global economy is making waves in international financial markets. With its economy doubling to $4 trillion over the past decade, India has become a major player in the international economy. The country now boasts the fifth-largest stock market and a $1.3 trillion sovereign debt market that is attracting global and institutional investors. The stable currency, the rupee, is being used for a lucrative carry trade across the $7.5 trillion daily churn in global capital markets. As long as the Reserve Bank of India remains committed to stabilizing the rupee, international and institutional investors will continue to use it as the basis of a global carry trade. JPMorgan's decision to include Indian fixed income assets into its emerging market global bond index is expected to further stimulate demand for rupee-denominated assets. The rupee-dollar bilateral pair is now a favored regional carry trade against other local currencies, and its future volatility is favorable compared to regional peers. However, as the Indian economy continues to grow, demand for rupees will expand, potentially testing the Reserve Bank of India's commitment to keeping the rupee undervalued and a cheap funding currency.

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