Bloomberg last week became the second major global firm to announce inclusion of Indian government securities in an emerging market bond index after JPMorgan Chase (Sept 2023). These moves are seen to boost dollar inflows into the country and bring down the rate of interest. Since these indices are widely followed by global bond fund managers, billions of dollars could flow into India because the inclusion.
Indian government bonds will be included in Bloomberg’s EM Local Currency government index and related indices in Jan 2025. Over the next 10 months, till Oct 2025, the weight of Indian G-Secs would finally rise to the maximum possible 10%.
Bloomberg’s Emerging Market Bond Index is…
Like the sensex and Nifty are stock indices, Bloomberg’s Emerging Market Local Currency government Index is a benchmark for government securities markets. This index will track the prices of 34 Indian government bonds.
Global fund managers will now buy Indian gilts…
Several global fund managers, who invest in gilts issued by emerging market countries, use such indices to either benchmark their portfolios or mirror the constituents of the indices. Globally, investments worth trillions of dollars are benchmarked to such indices.
Impact on Indian G-Secs…
Foreign fund managers will buy Indian gilts that are the constituents of these indices. According to some estimates, by Oct 2025 by when Indian gilts will be fully included into Bloomberg’s indices, incremental foreign funds worth about $5 billion could come into India through the foreign portfolio investment route.
Rupee set to gain, rates may come down…
Inclusion of Indian gilts into global bond indices would prompt foreign funds to buy Indian G-Secs, resulting into a fall in yields on these bonds. This could bring down the government’s cost of borrowing from the market. This, in turn, could lead to fall in yields on corporate bonds, resulting in lower borrowing costs for companies in India too. Added foreign fund flows will also have a positive impact on the rupee, which could strengthen against other currencies.
Indian government bonds will be included in Bloomberg’s EM Local Currency government index and related indices in Jan 2025. Over the next 10 months, till Oct 2025, the weight of Indian G-Secs would finally rise to the maximum possible 10%.
Bloomberg’s Emerging Market Bond Index is…
Like the sensex and Nifty are stock indices, Bloomberg’s Emerging Market Local Currency government Index is a benchmark for government securities markets. This index will track the prices of 34 Indian government bonds.
Global fund managers will now buy Indian gilts…
Several global fund managers, who invest in gilts issued by emerging market countries, use such indices to either benchmark their portfolios or mirror the constituents of the indices. Globally, investments worth trillions of dollars are benchmarked to such indices.
Impact on Indian G-Secs…
Foreign fund managers will buy Indian gilts that are the constituents of these indices. According to some estimates, by Oct 2025 by when Indian gilts will be fully included into Bloomberg’s indices, incremental foreign funds worth about $5 billion could come into India through the foreign portfolio investment route.
Rupee set to gain, rates may come down…
Inclusion of Indian gilts into global bond indices would prompt foreign funds to buy Indian G-Secs, resulting into a fall in yields on these bonds. This could bring down the government’s cost of borrowing from the market. This, in turn, could lead to fall in yields on corporate bonds, resulting in lower borrowing costs for companies in India too. Added foreign fund flows will also have a positive impact on the rupee, which could strengthen against other currencies.