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Informist, Wednesday, Oct. 9, 2024

 

--FTSE Russell: To include India's FAR bonds in emerging mkt govt bond index

--FTSE Russell: To add India bonds to indices over 6 mos starting Sept 2025

--FTSE Russell: 32 India FAR bonds eligible for index inclusion as of Oct

--FTSE Russell: India regulators addressing FPI registration issues

 

MUMBAI – FTSE Russell will add India's government bonds under the fully accessible route to its Emerging Markets Government Bond index and regional indices starting September 2025, it said in a release Wednesday. The inclusion will be phased over six months in equal tranches, the release said.

 

"Taken together, the relative market accessibility of the Indian government bond market for international investors has been deemed broadly comparable to other mainstream emerging market local currency government bond markets, which are assigned a Market Accessibility Level of 1," the release said. India's government bonds have been on FTSE Russell's watchlist for inclusion since 2021. 

 

FTSE Russell is the last major global index provider to include India's fully accessible route government bonds, which have no restrictions on foreign ownership. As of October, 32 fully accessible route bonds are eligible for entry into the emerging market index, the release said, with $473.8 billion in par-value outstanding. India's market-value weightage on the 17-country index will be 9.35%, the second-highest behind China, FTSE Russell said.

 

"All Indian government bonds that are eligible under the FAR programme and meet other index inclusion rules will be added to the index, including securities with an original tenor of 14-years and 30-years issued prior to Jul. 29," the release said. New bonds in these tenures are not eligible under the FAR route starting Jul. 29, the Reserve Bank of India has said.

 

JP Morgan has been adding India to its emerging market index over 10 months starting Jun. 28, while Bloomberg will do so starting Jan. 31, also over 10 months. These inclusions are expected to fetch over $30 billion in index-related inflows. Since Sept. 21, 2023, when JP Morgan announced the inclusion, FPIs have bought index-eligible bonds worth nearly $19 billion. Additional inflows on account of the FTSE Russell index may account for only $2 billion-$5 billion, MUFG estimated.

 

India's government bonds will also be added to regional Asian indices operated by FTSE Russell, including the Asian Government Bond Index and Asian-Pacific Government Bond Index, the release said. In the EMGBI 10?pped Index, India will have the maximum 10% weight, joining China and Indonesia.

 

India's accessibility to FPIs has improved since FTSE Russell's last review in March, it said. India's regulators are addressing issues related to FPI registration, easing the onboarding process, the release said. Accessibility has also improved with the increased entry of FPIs due to other bond index inclusions, and custodian banks broadly offer same-day funding to address margin requirements, the lack of which was a concern for the index provider in March.

 

"FTSE Russell thanks the Reserve Bank of India for its continued dialogue and commitment to supporting investment in its local market by global investors," the release said. As part of the September index review, FTSE Rusell included South Korea's sovereign bonds to its broader World Government Bond index.  End

 

US$1 = INR 83.96

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Aaryan Khanna

Edited by Namrata Rao

 

 

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