NEW DELHI: JPMorgan said on Friday it will include India in its widely adopted emerging markets index, paving the way for billions of dollars inflows into the world’s fifth-largest economy.
India’s local bonds will be included in the Government Bond Index-Emerging Markets (GBI-EM) index and index suite, which JPMorgan says is benchmarked by approximately $236 billion in global funds.
JPMorgan said 23 Indian Govt Bonds (IGBs) with a combined notional value of $330 billion are eligible. They all fall under the “fully accessible” category for non-residents.
“India’s weighting is expected to reach the maximum weighting threshold of 10% in the GBI-EM Global Diversified, and approximately 8.7% in the GBI-EM Global index,” JPMorgan said.
The drawdown will start on June 28, 2024 and will extend over ten months in 1% increments on the index weighting as India is expected to reach the maximum weighting of 10%, JPMorgan said.
India began discussions in 2019 about including its debt in global indices, while also talking to Euroclear about clearing and settlement.
It lifted restrictions on foreign investment on some government bonds in 2020 as part of a bid to get into global bond indexes. Several bonds are now part of the “Fully Accessible Route” and have no restrictions on foreign investment.
But the government’s position on other issues, including capital gains tax and local settlements, delayed its uptake
Foreign investors buying Indian bonds remain tepid, with net purchases of $3.4 billion so far in 2023. Foreign investors own less than 2% of outstanding Indian government debt.
“An inclusion in JP Morgan’s index could cause others to follow,” BofA Securities said in a report in July.
In the same announcement, JPMorgan said Egypt’s suitability for the GBI-EM series will be assessed over three to six months, amid reports of “material” hurdles to currency repatriation.
“If the hurdles cited by benchmarked investors persist, there will be a status review for the removal of Egypt from the GBI-EM series,” JPMorgan said.
India’s local bonds will be included in the Government Bond Index-Emerging Markets (GBI-EM) index and index suite, which JPMorgan says is benchmarked by approximately $236 billion in global funds.
JPMorgan said 23 Indian Govt Bonds (IGBs) with a combined notional value of $330 billion are eligible. They all fall under the “fully accessible” category for non-residents.
“India’s weighting is expected to reach the maximum weighting threshold of 10% in the GBI-EM Global Diversified, and approximately 8.7% in the GBI-EM Global index,” JPMorgan said.
The drawdown will start on June 28, 2024 and will extend over ten months in 1% increments on the index weighting as India is expected to reach the maximum weighting of 10%, JPMorgan said.
India began discussions in 2019 about including its debt in global indices, while also talking to Euroclear about clearing and settlement.
It lifted restrictions on foreign investment on some government bonds in 2020 as part of a bid to get into global bond indexes. Several bonds are now part of the “Fully Accessible Route” and have no restrictions on foreign investment.
But the government’s position on other issues, including capital gains tax and local settlements, delayed its uptake
Foreign investors buying Indian bonds remain tepid, with net purchases of $3.4 billion so far in 2023. Foreign investors own less than 2% of outstanding Indian government debt.
“An inclusion in JP Morgan’s index could cause others to follow,” BofA Securities said in a report in July.
In the same announcement, JPMorgan said Egypt’s suitability for the GBI-EM series will be assessed over three to six months, amid reports of “material” hurdles to currency repatriation.
“If the hurdles cited by benchmarked investors persist, there will be a status review for the removal of Egypt from the GBI-EM series,” JPMorgan said.
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