Synopsis
On January 31, Indian government bonds will be added to the Bloomberg EM Index, which is expected to increase foreign fund inflows. This move is anticipated to strengthen India's position in global markets over time.Key Takeaways
- Inclusion of Indian bonds in Bloomberg EM Index.
- Gradual integration over 10 months.
- Potential for increased corporate bond investment.
- India to join China and South Korea in top markets.
- 34 Indian securities to be included initially.
New Delhi, Jan 30 (NationPress) The addition of Indian government bonds to the Bloomberg Emerging Market (EM) Index on January 31 is expected to attract further foreign fund inflows from international investors and enhance India's global standing, according to market analysts on Thursday.
India’s Fully Accessible Route (FAR) bonds will be incorporated into the Bloomberg EM Local Currency Government Index and related indices starting January 31.
The integration will occur gradually over a period of 10 months, achieving full weight by October 2025, as announced in March 2024.
According to Vishal Goenka, Co-founder of IndiaBonds.com, "This global acknowledgment of Indian bonds will fortify India’s bond market, enhance liquidity, and facilitate greater investments in corporate bonds over time."
The Indian FAR bonds will initially enter the index with a weight of 10 percent of their market value, increasing by 10 percent each month until they attain full market value weighting by October.
The indices affected by this inclusion include the Bloomberg EM Local Currency Government Index, the Bloomberg EM Local Currency Government Index 10 percent Country Capped Index, and associated sub-indices.
Upon full integration, India is anticipated to be among the top three largest markets alongside China and South Korea within the Bloomberg Emerging Market 10 percent Country Capped Index.
Based on data from January 31, 2024, the index will feature 34 Indian securities, constituting approximately 7.26 percent of a $6.18 trillion market value-weighted index.
This marks the second significant global index to include Indian bonds, following JP Morgan’s decision to add these bonds from June 28, 2024.
Since JP Morgan's announcement regarding its index inclusion, investments in FAR bonds have surged to around $7.55 billion as of January 21, 2025, according to data from the Clearing Corporation of India Ltd (CCIL).
However, the top five countries dominate nearly 80 percent of the weightage in the MSCI Emerging Market Index, as per the MSCI EM Index report.
Nevertheless, global experts assert that India has shown consistent strength in recent years.
Additionally, CLSA, a global brokerage firm, has shifted its "tactical allocation" from China to India, citing rising concerns over Beijing’s economy and investor sentiment following the recent US presidential election.
