Indian government bonds might be included in Bloomberg indices in 2024
The addition of Indian government bonds to global indices is anticipated to attract billions of dollars in foreign investment into the domestic sovereign debt market. Bloomberg is considering including Indian government bonds in its indices, with the proposal set to take effect in September 2024.
According to a statement by Bloomberg Index Services Limited on January 8, the proposed inclusion involves soliciting feedback on incorporating India Fully Accessible Route (FAR) bonds into the Bloomberg Emerging Market (EM) Local Currency Index. The phasing-in process is slated to commence in September 2024 and extend over five months, with each month introducing 20 percent of the full-market value of FAR category bonds. The completion of this process is expected in January 2025.
The FAR category encompasses bonds that foreign investors can purchase without limitations or restrictions. Upon full integration into the Bloomberg Emerging Market 10 percent Country Capped Index, India FAR bonds will be capped at a 10 percent weight within the index. At this point, the Indian Rupee is projected to become the third-largest currency component in the Bloomberg Emerging Market Local Currency Index, trailing behind the Chinese Renminbi and the South Korean Won.
While Bloomberg’s proposal aligns with JPMorgan’s announcement in September 2023, stating that Indian government bonds would be included in its Government Bond Index-Emerging Markets (GBI-EM) global index suite from June 2024, Bloomberg’s plan does not propose India’s inclusion in its key Bloomberg Global Aggregate and related indices. Bloomberg Index Services Limited emphasized ongoing monitoring of relevant market developments.
As part of the consultation process, Bloomberg is seeking input from index users on two questions: agreement with the proposal to include eligible Indian bonds in the EM Local Currency Indices and agreement with their phased inclusion over five months starting September 2024.