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10-10-2024
NEW DELHI/ MUMBAI: Global index provider FTSE Russell said on Tuesday it would include India’s sovereign bonds in its Emerging Markets Government Bond Index (EMGBI) from September 2025, after index inclusion by JP Morgan (JPM.N), opens new tab and Bloomberg Index Services, potentially drawing billions of dollars into local bonds.
The London-based index provider also added South Korean government bonds to the FTSE World Government Bond Index (WGBI) after two years on its watch list.
South Korean government bonds would represent 2.22% of the index on a market value-weighted basis and would be included in the FTSE’s WGBI beginning in November 2025, FTSE said in a statement.
Indian securities will be a part of FTSE’s EMGBI after being on the index provider’s watch list for the last three years. It would represent 9.35% of the index on a market-value weighted basis, FTSE said.
The market value of the EMGBI is $4.7 trillion, according to the FTSE release.
“The decision is a sentiment positive and will strengthen the demand side of India bonds structurally,” said Madhavi Arora, chief economist at Emkay Global Financial Services.
Indian bonds have seen foreign inflows of nearly $18.5 billion since the announcement of inclusion into JPMorgan Emerging Market index in September 2023. In a March review, FTSE had deferred inclusion of Indian bonds in its index due to taxation, registration and settlement issues but acknowledged India’s progress in the accessibility of the securities.
FTSE’s announcement follows inclusion of Indian government securities in JPMorgan’s Government Bond Index-Emerging Markets index starting in June 2024 and Bloomberg Index Services’ Emerging Market Local Currency starting in January 2025. Bloomberg Index Services said on Tuesday it would include in its Emerging Market Local Currency Index from Jan. 31 next year 34 Indian government bonds eligible for investment via the country’s fully accessible route (FAR).
“The inclusion of these bonds will be phased in over a 10-month period starting on the rebalance date of January 31, 2025,” it said in a statement.
“The weight of India FAR bonds will be increased in increments of 10% of their full market value every month over the 10-month period ending in October 2025.”
The Indian government began discussing inclusion of its securities in global indexes as far back as 2013, but the move was held back by its curbs on foreign investments in domestic debt.
In April 2020, the Reserve Bank of India introduced a clutch of securities free of foreign investment curbs under a “fully accessible route” (FAR) that made them eligible for inclusion in global indexes.
JPMorgan (JPM.N), opens new tab was the first to announce India’s inclusion in its widely tracked emerging market debt index in September last year, setting the stage for billions of dollars of inflows into the world’s fifth-largest economy.
Tuesday’s inclusion by Bloomberg Index Services Ltd. was based on feedback invited in January on its plan to include eligible Indian bonds in the EM local currency indexes phases over five months starting from September 2024, the company said.
As of January 31 this year, 34 Indian FAR bonds with a total market value of $448 billion were eligible for the EM Local Currency Government Index, and the other indexes, it added.
Once completely phased into the Bloomberg Emerging Market 10% Country Capped Index, India FAR bonds will be fully capped at 10% weight within the index. (Int’l News Desk)
