After JP Morgan, Bloomberg to include Indian bonds in EM index

Last year in September, JP Morgan Chase & Co announced the inclusion of Indian government bonds to JP Morgan GBI-EM Global index. The inclusion will be staggered over a 10-month period starting June 28, 2024, through March 31, 2025, JP Morgan had said.

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

The weight of FAR bonds will be increased in increments of 10 per cent 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, Bloomberg said.

The indices in scope for inclusion include the Bloomberg EM Local Currency Government Index, the Bloomberg EM Local Currency Government Index 10% Country Capped Index, and all related sub-indices.

According to Michael R Bloomberg, founder of Bloomberg, the inclusion is a reflection of India’s growing importance to the global economy. “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,” he said.

Once completely phased into the Bloomberg Emerging Market 10% Country Capped Index, India is expected to join both China and South Korea as markets that reach the 10 per cent 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 per cent of a $6.18 trillion index on a market value weighted basis, Bloomberg said.

Bloomberg indices will create an ex-India version of the EM Local Currency Government Index and can also create other standard and custom versions of the index.

Inclusion of domestic bonds to global indices will help bring in dollar inflows into India and ensure a stable financing of the current account gap of the country. After JP Morgan had announced inclusion of Indian bonds to its emerging markets bond index, analysts had estimated a direct inflows of around $20-25 billion into the country over the next two years.

“Inclusion of India in the Bloomberg Bond Index is expected to attract investment exceeding $5 billion. This comes on top of the expected investment of around $20 billion in the JP Morgan EM Bond Fund,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.