“FTSE Russell announces that the market accessibility level for India will be reclassified from 0 to 1, and Indian government bonds will be included in the FTSE Emerging Markets Government Bond Index (EMGBI), starting in September 2025,” FTSE Russell said in a statement. in the early hours of Wednesday.
“This decision reflects continued progress in the market accessibility of these securities to international investors and the growing importance of the Indian government bond market in major global emerging market bond portfolios.”
Government bond yields may fall as much as 5 basis points in early trading hours on Wednesday as the prospect of sustained foreign flows is likely to boost market sentiment. However, an hour into trading, bond traders will receive fresh signals from the Reserve Bank of India’s policy statement, scheduled for 10 am. The 10-year government bond yield closed Tuesday at 6.82%.
“As of the October 2024 index profiles, 32 INR-denominated Indian government FAR (Fully Accessible Route) bonds ($473.8 billion in face amount outstanding) are expected to be eligible for the EMBBI, making which represents 9.35% of the index on a market value. weighted basis,” the FTSE Russell note said.
Local bond traders generally expect foreign investments worth between $3 billion and $4 billion to flow into the Indian bond market due to the FTSE EGBI listing. in conversations with some index providers) is that the FTSE EMGBI tracks no more than $40 billion of assets under management (probably less), which implies no more than $4 billion of passive flows and some subsequent active flows for us,” said Madhavi Arora, chief economist. at Emkay Global Financial Services. FTSE Russell recognized the growing importance of the Indian government bond market in major global emerging market bond portfolios, while thanking the Reserve Bank of India for its dialogue and commitment to enabling international investment in local bonds .
The FTSE decision comes after two other major global bond index providers – JP Morgan and Bloomberg – have included Indian sovereign debt in their indices.
Eligible local currency fixed rate Indian government bonds under the drivenThe Fully Accessible Route category will be included in the FTSE EMGBI, as well as the regional FTSE Asian Government Bond Index (AGBI) and the FTSE Asian-Pacific Government Bond Index (APGBI) and the indices derived from them, the note said. from FTSE Russell. .
“Prices will be obtained from the LSEG Price Service and represent an instantaneous time of 6:00 pm Tokyo (2:30 pm Mumbai). “All Indian government bonds that are eligible under the FAR program and meet other index inclusion rules will be added to the index, including securities with an original term of 14 and 30 years issued before July 29, 2024,” it states. read in the note.
In July, the RBI said it had decided to exclude all new securities with tenors of 14 and 30 years from the Fully Affordable Route.
India is projected to comprise 10% of the index on a market value weighted basis in the EGBBI 10% Capped index and 9.73% of the AGBI on a market value weighted basis.
According to statistics provided by FTSE Russell, the total market value of EMBBI, including India, stood at $5.2 trillion as of September 30, 2024.
In September 2023, JP Morgan announced the inclusion of FAR Indian government bonds in its emerging markets index, effective June 28, 2024. Meanwhile, Bloomberg had announced the inclusion of local bonds in its emerging markets index as of June 28, 2024. starting January 2025.
Foreign portfolio investment in FAR bonds has increased by 1.5 trillion rupees, or about $17.8 billion, since September 22, the day JP Morgan made its announcement.
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