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Informist, Tuesday, Jan. 13, 2026

 

By Aaryan Khanna

 

NEW DELHI – The tiff between India and the US on a trade deal, trade partners and sanctions, as well as weakness in the rupee likely contributed to the delay in India's inclusion on Bloomberg's Global Aggregate Index, government bond dealers said. Domestic traders and investors had widely expected India's inclusion in the index, which may have drawn between $10 billion and $25 billion of inflows from foreign portfolio investors in 2026. 

 

"FPIs had turned a bit bearish in recent days and the signals were turning negative," a dealer at a foreign bank said. "There are several aspects to it--bond yields are not that attractive for investors to give time and energy to track a sub-1% weight on the index. The rupee has been weak and now hedging costs are much higher than when the proposal had come."

 

Bloomberg Index Services Ltd. Tuesday said it aims to keep the review of India's fully accessible route government bonds for inclusion in its flagship Global Aggregate Index "open and ongoing", and plans to provide the next update on the potential inclusion by mid-2026. It will continue to engage with index users, market participants, regulators, and other entities to seek clarity on "further efficiencies" which could be implemented in market infrastructure and post-trade processes, according to a release. 

 

The index provider had sought feedback on India's inclusion on its flagship debt index on Sept. 18. The one-year dollar-rupee forward premium had risen to 2.60% Monday from 2.36% then, while the rupee has depreciated 2.3% against the dollar since then. Meanwhile, the yield on the 10-year benchmark gilt yield has risen only 10 basis points since Sept. 18 to 6.61% Monday.

 

"It was a very close call. Till November-end it looked positive but then no (trade) deal, INR (rupee) issues forced them to wait," a dealer at a private-sector bank said. "...operational issues are just an excuse."

 

In the release, Bloomberg Index Services said respondents flagged matters relating to operations and market-infrastructure that required evaluation before inclusion in the global investment grade index, it said. The lack of fully automated trading workflows, complex and long procedures for fund registrations, and settlement and repatriation timelines of post-trade tax proceedings were some issues raised, it said.

 

At the same time, Bloomberg Index Services received "broad support" from market participants on the "potential eventual inclusion" of the Indian government bond market in global investment grade benchmarks. Respondents said significant progress has been made in recent years, such as better market accessibility and the implementation of the Fully Accessible Route, which removed key capital controls, according to the release. India's fully accessible route bonds have been included in Bloomberg's Emerging Market Local Currency Indices since January 2025. 

 

In recent weeks, comments from US President Donald Trump on sanctions and more heavy-handed measures on Russia's oil customers were seen by investors as a red flag for US-India relations, dealers said. Moreover, talks on an India-US Bilateral Trade Agreement have stalled since November despite mixed signals from both US and India officials as recently as Monday. India has continued to import oil from Russia despite a drop in orders even after a 50% tariff levied on India's exports to the US in August, half of which was linked to its import of Russian oil. India's imports of Russian oil fell nearly 35% on month to 1.2 million barrels per day, the lowest in nearly three years, according to data from global trade analytics firm Kpler. 

 

"The conspiracy theory is that the US-India trade negotiations and Trump's increasing coldness on India had stopped US investors voting favourably on India (India's inclusion on the Bloomberg Global Aggregate Index)," a dealer at a primary dealership said.

 

For now, the 10-year gilt yield is not seen topping 6.70%, the highest it has gone in 2025-26 (Apr-Mar). This is because of the speculated bond purchases by the Reserve Bank of India in the secondary market to replace a maturing bond last week, which are expected to continue till Friday. The rupee's fall has also been capped at 90.29 a dollar after ending at 90.15 a dollar Monday, likely due to the RBI's dollar sales. Traders said the 10-year gilt yield may spike above the psychologically crucial mark after the RBI's bond purchases through open market operations end and before the presentation of the Union Budget on Feb. 1, which is likely to show an increase in the government's gross borrowing target for FY27.  End

 

US$1 = INR 90.28

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

 

Edited by Akul Nishant Akhoury

 

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