After JP Morgan, Bloomberg index too to feature Indian bonds

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The Bloomberg Emerging Market (EM) Local Currency Government Index is going to accommodate Indian government securities called “Fully Accessible Route (FAR) bonds”, indicating a rising global acceptance of Indian debt paper. The process will begin on January 31, 2025, instead of September this year and will pan out over a period of 10 months.

The Bloomberg index marks the second major global index featuring Indian bonds. The first one was JP Morgan. It had announced inclusion of Indian debt in its index from June 28, 2024.

One of the direct benefits of the flow of foreign funds into Indian debt paper is the bigger space that the private sector in the country would get for investment. The inflow of dollars would also provide a buffer to the Indian rupee.

The Indian economy is on a path of steady growth. A statement from Bloomberg stated the decision to include Indian FAR Bonds in the index marks a key milestone amidst the measures India has taken to open its bond markets. “Bloomberg Indices is committed to serving the global investment community and this development will increase access to, and participation in Indian markets,” Businessline quoted Nick Gendron, Global Head of Fixed Income Index Product, Bloomberg Index Services Limited as saying. The decision to include India FAR Bonds in the Bloomberg EM Local Currency Government Index followed a nod from market participants and stakeholders. Bloomberg also stated that the weighting of the FAR bonds would be raised in 10% of their full market value every month between January and October 2025.

The period of inclusion of the bonds has been raised to 10 months. Earlier, it was supposed to be five months.

Within the market cap weighted version index, India could be the third largest country following China and South Korea, said Bloomberg. According to data as on January 31, 2024, the index is going to feature 34 Indian securities. These would represent 7.26% of a $6.18-trillion index on a market value-weighted basis, said the statement. “This is an important marker in the development of India’s financial markets and a reflection of India’s growing importance to the global economy,” said Bloomberg. The Economic Times mentioned quoting bankers that the development might result in at least $5 billion flowing into the local market as part of passive flows. HSBC expects that a cumulative flow of $35-45 billion might take place in the next 15 months as Indian debt comes to be featured in the indices of JP Morgan and Bloomberg.