After JP Morgan, Bloomberg to Include Indian Bonds in EM Index

Bloomberg has announced the inclusion of India’s Fully Accessible Route (FAR) bonds in its Emerging Market (EM) Local Currency Government Index and related indices, with a phased approach over ten months starting January 31, 2025. This follows JP Morgan’s similar move earlier, signaling increased foreign investment potential in Indian government securities.

Phased Inclusion Process

• Bloomberg will phase in the inclusion of FAR bonds over a ten-month period, starting January 31, 2025.
• Weight of FAR bonds will increase in increments of 10% of their full market value each month until October 2025 when they will be fully weighted.

Indices Included

• FAR bonds will be included in indices such as the Bloomberg EM Local Currency Government Index and the Bloomberg EM Local Currency Government Index 10% Country Capped Index, along with related sub-indices.
• This move aims to attract significant foreign investment into the Indian government securities market.

Market Impact and Expectations

• Inclusion of FAR bonds could potentially lead to a decline in Indian bond yields and strengthen the rupee.
• India is expected to join China and South Korea in reaching the 10% cap within the Bloomberg Emerging Market 10% Country Capped Index.
• India is projected to become the third-largest country, by market cap, within the index, after China and South Korea.

Stakeholder Perspectives

• Bloomberg Indices’ decision follows consultation with market participants and stakeholders.
• Nick Gendron, Global Head of Fixed Income Index Product at Bloomberg Index Services Limited (BISL), highlights increased access to and participation in Indian markets.