(Bloomberg) -- The capital flowing into India as it joins global bond indexes will gradually trickle into company notes, according to one of the few women to run a firm in the country’s $2 trillion fixed-income market. 

The spreads between government and corporate bonds is widening as the foreign funds snap up sovereign securities. Buying of company debt will start with state-run firms and then eventually shift toward those with lower credit ratings, Aditi Mittal, co-founder and director of IndiaBonds.com, said. 

“Corporate bonds have been dominated by domestic investors, but in times to come, you will see international portfolio investors also investing,” she said in an interview on Bloomberg TV on Thursday. “We will see the spread to be contracting.”

India debuts in JPMorgan Chase & Co.’s flagship emerging markets bond index on Friday, a step that’s proving a watershed moment for its fixed income market. With an estimated $3 billion of inflows a month into government bonds alone, the accession has the potential also to lower the cost of capital for companies.  

The country’s local-currency corporate bond market is currently dominated by domestic players, with foreign investors having utilized only around 16% of their available investment limit. 

Mittal began working in fixed income thanks to her father, the founder of A.K. Capital Services Ltd., one of India’s oldest debt brokers. Her on-line bond platform gives individuals in India direct access to a market traditionally dominated by large institutions. 

Data compiled by Bloomberg show the yield on 3-year AAA rated corporate bonds in the country has risen this month, while that on government bonds has fallen. 

“This is going to be a big milestone,” she said. As global funds gain confidence and experience investing in India, “they will come down the credit curve.” 

Bloomberg Index Services Ltd. will also include some Indian bonds in its emerging market local currency index starting next year. Bloomberg LP is the parent company of Bloomberg Index Services Ltd., which administers indexes that compete with those from other service providers.

--With assistance from Subhadip Sircar.

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