Indian Bonds Debut In Bloomberg EM Index Amid Tapering Inflows

The inclusion of Indian government bonds in the Bloomberg Emerging Markets Local Currency Government indices will begin from Jan. 31, hoping to gain back the inflow momentum seen earlier in 2024.

Bloomberg said it will include India Fully Accessible Route bonds in the EM Local Currency Government Index and related indices starting Jan. 31, 2025.

Indian FAR bonds will be included in the Bloomberg EM Local Currency Government indices, with an initial weight of 10% of their full market value on Jan. 31, 2025.

The weight of FAR bonds will be increased in increments of 10% of their full market value every month over the 10-month period ending in October 2025, at which point, they will be weighted at their full market value in the indices.

This inclusion comes after the local bonds were added to JPMorgan Chase & Co.'s benchmark emerging-market index in June last year. The country is expected to reach the maximum weight of 10% in the index by this month, the highest possible weightage.

Post the JPMorgan inclusion, the domestic gilts have seen record inflows, bringing in liquidity and helping the currency remain firm. The inflows triggered, following the inclusion, helped the domestic gilts attract Rs 1.10 lakh crore inflows in 2024, the highest since 2017.

However, the appetite for domestic debt lost steam after Donald Trump’s election win upped speculation of higher US inflation and pushed up the dollar. Global funds withdrew Rs 4,287 crore under the FAR route in November last year. In January so far, FIIs sold Rs 3,564 crore in the general limit, while the FAR route still saw an inflow of Rs 7,263 crore.

The yield on the 10-year benchmark bond trades at a near three-year low after the Reserve Bank of India announced measures to boost liquidity in the banking system. On Friday, the yield on the bond opened flat at 6.68%.