Bloomberg proposes India gilts inclusion in EM Local Currency Index; seeks feedback
Agencies
Synopsis
As a result, the Indian FAR bonds will be included in the EM Local Currency indices with an initial weight of 20% of their full market value in September. The weight of FAR bonds will then be increased in increments of 20% of their full market value every month over the 5-month period ending in January 2025, when they will be weighted at their full market value (100%) in the indices, Bloomberg said.
By Vidya Sreedhar, ETMarkets.com
Last Updated:
MUMBAI - Bloomberg Index Services has proposed to include Indian bonds under the fully accessible route (FAR) in its emerging market local currency index. This comes four months after JPMorgan said it would include India bonds in its Global Bond Index - Emerging Markets, starting June this year.
As a result, the Indian FAR bonds will be included in the EM Local Currency indices with an initial weight of 20% of their full market value in September. The weight of FAR bonds will then be increased in increments of 20% of their full market value every month over the 5-month period ending in January 2025, when they will be weighted at their full market value (100%) in the indices, Bloomberg said.
Bloomberg has sought feedback on the proposed inclusion of India bonds by January 25.
If done, this will result in incremental foreign capital flows into the bond market.
Following the news of JPMorgan index inclusion, Finance Minister Nirmala Sitharaman had said this could result in inflows of over $23 billion.
The Government of India began discussing inclusion of its securities in global indexes far back in 2013, but restrictions on foreign investment in domestic debt had hampered the process.
In April 2020, the Reserve Bank of India introduced securities that were exempt from foreign investment restrictions under a "fully accessible route" (FAR).
India will continue to be excluded from the Bloomberg Global Aggregate and related indices, Bloomberg said.
Once completely phased into the Bloomberg EM 10% Country Capped Index, India FAR bonds will be fully capped at 10% weight within the index. At that point, the Indian rupee will become the third largest currency component, following the Chinese Renminbi and the South Korean Won, within the Bloomberg EM Local Currency Index, the index service provider said.
(With inputs from agencies)
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"Under the proposal, inclusion of India FAR bonds in the Bloomberg EM Local Currency Indices is to be phased in over a 5-month period starting in September 2024," the index provider said in a statement. As a result, the Indian FAR bonds will be included in the EM Local Currency indices with an initial weight of 20% of their full market value in September. The weight of FAR bonds will then be increased in increments of 20% of their full market value every month over the 5-month period ending in January 2025, when they will be weighted at their full market value (100%) in the indices, Bloomberg said.
Bloomberg has sought feedback on the proposed inclusion of India bonds by January 25.
If done, this will result in incremental foreign capital flows into the bond market.
Following the news of JPMorgan index inclusion, Finance Minister Nirmala Sitharaman had said this could result in inflows of over $23 billion.
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The Government of India began discussing inclusion of its securities in global indexes far back in 2013, but restrictions on foreign investment in domestic debt had hampered the process.
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In April 2020, the Reserve Bank of India introduced securities that were exempt from foreign investment restrictions under a "fully accessible route" (FAR).
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India will continue to be excluded from the Bloomberg Global Aggregate and related indices, Bloomberg said.
Once completely phased into the Bloomberg EM 10% Country Capped Index, India FAR bonds will be fully capped at 10% weight within the index. At that point, the Indian rupee will become the third largest currency component, following the Chinese Renminbi and the South Korean Won, within the Bloomberg EM Local Currency Index, the index service provider said.
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(With inputs from agencies)
(Subscribe to ETMarkets WhatsApp channel)
