There will be a rise of inflows amid India getting inclusion in the FTSE Emerging Markets Government Bond Index

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Indian Government Bonds in the JP Morgan global Bond Index Fund


India will remain on the FTSE Fixed Income Country Classification Watch List for the potential reclassification of its Market Accessibility Level from 0 to 1, and consideration for inclusion in the FTSE Emerging Markets Government Bond Index (EMGBI), stated FTSE Russell, the leading global index provider, in its annual country classification review for countries monitored by its global equity and fixed income indices.

The inclusion of nominal and inflation-linked local currency government bond markets in global FTSE fixed income indices is governed by the FTSE Fixed Income Country Classification Framework. Once India is added FTSE EMGBI, there will be huge inflows in the economy. It will further ease the international entry into the domestic markets.

A core feature of this framework is the assignment of Market Accessibility Levels, which are reviewed on a semi-annual basis. The transparent nature of the Market Accessibility Levels allows FTSE Russell to seek feedback from international investors on their practical investment experiences and to engage with relevant authorities in markets which are under review for potential reclassification. Index inclusion changes due to market size and credit rating are also assessed as part of the FTSE Fixed Income Country Classification Process.

In March 2021, India was added to the FTSE Fixed Income Country Classification Watch List for the potential reclassification of its Market Accessibility Level from 0 to 1, and for consideration for inclusion in the FTSE EMGBI.

Areas for improvement in the Indian government bond market structure highlighted by international investors remain largely unchanged from the previous March 2023 review and include the efficiency of Foreign Portfolio Investor (FPI) registration, as well as operational issues related to the settlement cycle, trade matching, and tax clearance process. FTSE Russell will continue its valuable dialogue with the Reserve Bank of India and seek feedback from market participants on their practical experiences of the evolution of the market structure.

The Government of India, in consultation with the Reserve Bank of India, has finalised its borrowing programme for the first half (H1) of FY 2023-24. Out of Gross Market borrowing of Rs 15.43 lakh crore projected for FY 2023-24 in the Union budget, Rs 8.88 lakh crore (57.55%) is planned to be borrowed in first half (H1).

Recently, India was added in JP Morgan’s watch list for its emerging market index. Commenting on same Mr Ganti Murthy, “The major event of the bond markets was the news of the inclusion of Indian Government Bonds in the JP Morgan global Bond Index Fund.”

He further added, “yields may come down due to fresh buying which may commence from June 24 onwards. Fresh buying by a new investor in the markets would now free up the portfolios of Indian Banks, which are currently the main stay of Indian Bond markets, and they can utilize their portfolios for fresh lending. The currency can appreciate a bit which can help contribute to the fight against inflation.

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