India to be added to Bloomberg Emerging Market Bond Index in 2025

Indian bonds Bloomberg index: Bloomberg on Tuesday, March 5, announced that India Fully Accessible Route (FAR) bonds will be included in the Bloomberg Emerging Market (EM) Local Currency Government Index and related indices, in a phased manner over 10 months, starting January 31, 2025.

"Indian FAR bonds will be included in the Bloomberg EM Local Currency Government indices with an initial weight of 10% of their full market value on January 31, 2025," said the release.

The announcement comes months after JP Morgan announced that it will include India bonds in its Global Bond Index: Emerging Markets, beginning June this year.
 
"While this change is targeted for implementation effective September 2024, further information on the implementation date will be provided after the end of the consultation period. Please be advised that all feedback received during the consultation will be reviewed internally by BISL before a final decision is made," JP Morgan had said.

The decision to include India FAR Bonds in the Bloomberg EM Local Currency Government Index was taken following a period of extensive consultation to solicit feedback from market participants and stakeholders, said the release. 

The weight of FAR bonds will be increased in increments of 10% of their full market value every month over the ten-month period ending in October 2025, at which point they will be weighted at their full market value in the indices, added the press release.

India bonds can find a place in the Bloomberg EM Local Currency Government Index, the Bloomberg EM Local Currency Government Index 10% Country Capped Index, and all related sub-indices.

Furthermore, the release clarified as and when completely phased into the Bloomberg Emerging Market 10% Country Capped Index, India will join  China and South Korea as markets that reach the 10% cap. 

Within the market cap-weighted version of the index, India is expected to be the third largest country after China and South Korea. Using data as of January 31, 2024, the index would include 34 Indian securities and represent 7.26% of a $6.18 trillion index on a market value weighted basis, the release highlighted.

“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 Michael R. Bloomberg, founder of Bloomberg LP. “India’s continued emergence as a global financial center promises to be one of the most significant economic developments of this decade, and Bloomberg is committed to bolstering it by connecting more investors to India.”

“The Indian economy is on a steady growth trajectory and inclusion of Indian FAR Bonds in our Emerging Market Local Currency Government 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,” said Nick Gendron, Global Head of Fixed Income Index Product, Bloomberg Index Services Limited (BISL).

How will India bond inclusion in the Bloomberg index impact?

Zee Business Research desk highlights that on the back of the said inclusion, India's debt market can see an inflow of US$2 million.  Further, it iterated that in terms of fund flow, the inclusion into the Bloomberg EM local currency index is not significant. Further, it said post the inclusion in the aforesaid index, India can also be added to the Bloomberg Global Aggregate Index after 1 year which can result in a fund inflow to the tune of US$15-20 billion.