India bonds set to be included in the Bloomberg emerging market index

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India government’s Fully Accessible Route (FAR) bonds is set to be included in the Bloomberg Emerging Market (EM) Local Currency Index.

This will be phased in over a 5-month period starting in September 2024.

As a result, the Indian FAR bonds will be included in the EM Local Currency indices with an initial weight of 20 per cent of their full market value in September 2024. The weight of FAR bonds will be increased in increments of 20 per cent of their full market value every month over the 5-month period ending in January 2025, at which point they will be weighted at their full market value (100 per cent) in the indices.

“Once completely phased into the Bloomberg Emerging Market 10 per cent Country Capped Index (Ticker: EML1TRUU), India FAR bonds will be fully capped at 10 per cent weight within the index. At that point, Indian rupee will become the third largest currency component, following the Chinese Renminbi and the South Korean Won, within the Bloomberg Emerging Market Local Currency Index,” Bloomberg Index Services Limited said in a consultation document.

In April 2020, the Reserve Bank of India introduced securities that were exempt from foreign investment restrictions under a “fully accessible route” (FAR).

32 securities

Using data as of November 30, 2023, the index would include 32 Indian securities and represent 6.99 per cent of a $5.96 trillion index. The proposal comes just a few months after JPMorgan said it would include India in its widely tracked emerging market debt index from June.

“BISL will also create an ex-India version of the EM Local Currency Government Index and can also offer customised capped versions of the index. The Bloomberg Emerging Market Local Currency and related indices are in scope for the change. India will continue to be excluded from the Bloomberg Global Aggregate and related indices, while Bloomberg will continue to monitor related market developments,” it said.