Indian Bonds to Boost Inflows with Bloomberg EM Index Inclusion
Indian government bonds are set to join the Bloomberg Emerging Market (EM) Index effective January 31, 2025, as per market experts. This would trigger massive inflows of foreign funds and improve India's rank in global financial markets. Indian Fully Accessible Route (FAR) bonds are going to be added to the Bloomberg Emerging Market Local Currency Government Index, as well as all its related sub-indices. This will be a giant leap for Indian bonds in international recognition.
The process will be spread over 10 months, during which Indian FAR bonds will be included at 10% of their market value and increase by 10% every month till full market value weighting by October 2025. This inclusion is expected to enhance liquidity in India's bond market and encourage more investments in corporate bonds over time.
Vishal Goenka, Co-founder of IndiaBonds.com, emphasized that this global acknowledgment of Indian bonds would significantly boost the bond market's strength. “This move will improve liquidity and set the stage for long-term growth in India's bond markets”, Goenka said.
As per index data effective January 31, 2025, 34 Indian securities will be added to the Bloomberg EM Local Currency Government Index, and constitute about 7.26% of the $6.18 trillion market value-weighted index. India is expected to join China and South Korea as one of the three largest markets in the Bloomberg EM 10% Country Capped Index after being fully added.
This is the second big international benchmark to add Indian paper, after JP Morgan said it would include them in its global index from June 28, 2024. Since JP Morgan announced its decision, the inflows into the FAR bonds have increased to about $7.55 billion as on January 21, 2025, reports the Clearing Corporation of India Ltd.
However, experts say that top five countries account for nearly 80% of the weightage of MSCI Emerging Market Index and proclaim India's rising and increasing presence on global markets. As India is going through an upward curve, CLSA, a global brokerage firm, has already changed its 'tactical allocation' from China to India as China's economy is growing concerns and the investor sentiment is changing before the US presidential election.
Indian bonds' addition in these indices are considered milestones in this context. They should now help promote better investment opportunities around the globe and lead to continued growth in India's financial markets.
