March 14, 2024
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India bonds in Bloomberg EM bond indices may bring $2-3 billion inflows, say experts
The Indian bond market is likely to receive inflows of $2 billion to $3 billion from foreign investors after the inclusion of Indian bonds in the Bloomberg Bond Index., experts said.
Bloomberg Index Services (BISL) on March 5 said it will add India Fully Accessible Route (FAR) bonds to the Bloomberg Emerging Market (EM) Local Currency Index from January 31, 2025.
FAR securities are the bonds which global indices consider eligible for inclusion. Foreign investors do not have any limits for investment.
Experts said that the expected inflows are lower than the likely inflows from the JP Morgan Bond Index due to the small index size.
“This is a smaller index and is expected to generate inflows of $2 billion to $3 billion to India,” said Gaura Sengupta, economist at, IDFC First Bank.
A dealer with a foreign bank said there could only be $1-$2 billion inflows through this index.
On January 8, BISL opened a consultation to get feedback on the proposed inclusion of the India FAR bonds in the Bloomberg EM Local Currency Index.
BISL decided to include India FAR bonds in the Bloomberg EM Local Currency Government Index and all related indices based on the feedback during the consultation.
Prior to this, last year, JP Morgan said it would include Indian government bonds in its widely tracked emerging market index starting June 28, 2024.
About $23.6 billion of inflows from foreign portfolio investors are expected from July 2024 to May 2025, experts said.
