Mumbai: US investment bank Morgan Stanley will ramp up its presence in India’s credit markets and hopes to benefit from the width and depth of the government debt market as it prepares to launch its primary dealing business, a senior official said on Monday.
Three days after it got its licence from the central bank to operate as a primary dealership in India, Ronodeb Roy, head of the interest rates, credit and currency division for Morgan Stanley in Asia, said India’s huge government borrowing and growth prospects would be drivers for its bond market.
“The government bond market is one of the biggest and deepest in Asia and we expect the government borrowing programme will continue to provide the market with significant business opportunities,” Roy told Reuters in an interview on a visit to the firm’s offices in central Mumbai.
India unveiled an upwardly revised record borrowing plan of Rs4.51 trillion for the 2009-10 fiscal year, three times more than last year’s and a fiscal deficit of 6.8%, its biggest in 16 years.
Roy, who joined Morgan Stanley in 2008 from Merrill Lynch and Co., said the borrowing plan will not crowd out private borrowers.
He also said he was comfortable with caps on foreign investments in both government and credit markets, as they haven’t yet been fully utilized and policymakers have opened up India’s markets more than some Asian countries such as China.
India limits foreign investment in corporate debt at $16 billion (Rs77,440 crore) and in federal bonds at $5 billion and Roy said the licence allowed it to trade interest rate derivatives, both on the long and the short side and participate in the central bank’s daily money market auctions.
“We are going to be an active trader and a solution provider to our clients,” Roy said.
The Indian fixed income market now has 18 primary dealers—seven stand-alone players, including Morgan Stanley, and 11 banks—that trade government bonds and underwrite federal bond auctions as their main businesses.
Morgan Stanley added 12 people to its fixed income trading team since last July and expects to add more as volumes grow.
Tony Munroe contributed to this story.