Inclusion of Indian govt bonds in Bloomberg EM Index from Jan 31 to boost foreign fund inflows

New Delhi: The inclusion of Indian government bonds in the Bloomberg EM (Emerging Market) Index on January 31 will get further foreign fund inflows from global funds and make it stronger globally, market experts said on Thursday.

India’s Fully Accessible Route (FAR) bonds are set to be included in the Bloomberg Emerging Market (EM) Local Currency Government Index and related indices from January 31.

The inclusion will take place gradually over 10 months, reaching full weight by October 2025, it was announced in March 2024.

“Such global recognition of Indian bonds would strengthen India’s bond market, improve liquidity and pave the way for increased investments in corporate bonds over time,” said Vishal Goenka, Co-founder of IndiaBonds.com.

Indian FAR bonds will enter the index with an initial weight of 10 per cent of their market value, increasing by 10 per cent every month until they reach full market value weighting in October.

The indices impacted by this move include the Bloomberg EM Local Currency Government Index, the Bloomberg EM Local Currency Government Index 10 per cent Country Capped Index, and related sub-indices.

Once fully phased in, India is expected to join China and South Korea as one of the three largest markets in the Bloomberg Emerging Market 10 per cent Country Capped Index.

Based on data from January 31, 2024, the index will include 34 Indian securities, making up about 7.26 per ce nt of a $6.18 trillion market value-weighted index.

This marks the second major global index to include Indian bonds, following JP Morgan’s decision to add those from June 28, 2024.

Since JP Morgan announced its inclusion of Indian bonds in its global index, investments in FAR bonds have already reached about $7.55 billion as of January 21, 2025, according to the Clearing Corporation of Indian Ltd (CCIL) data.

However, the top 5 countries account for nearly 80 per cent of the weightage in the MSCI Emerging Market Index, according to the MSCI EM Index report.

However, as per global experts, India has gone from strength to strength in recent years.

Moreover, CLSA, a global brokerage firm in its earlier note shifted “tactical allocation” to India from China as the firm sees growing concerns over Beijing’s economy and investor sentiment after the US presidential election.

–IANS