JPMorgan to add India to its emerging-markets bond index in June 2024

By Subhadip Sircar and Matthew Burgess

JPMorgan Chase & Co. will add Indian government bonds to its benchmark emerging-market index, a keenly awaited event that could drive billions of foreign inflows to the nation’s debt market. 

 

The index provider will add the securities to the JPMorgan Government Bond Index-Emerging Markets starting June 28, 2024. The South Asian nation will have a maximum weight of 10% on the index, according to a statement Thursday. 

Index inclusion follows “the Indian government’s introduction of the FAR program in 2020 and substantive market reforms for aiding foreign portfolio investments,” the team led by the firm’s global head of index research, Gloria Kim, said in a statement. Almost three-quarters of benchmark investors surveyed were in favor of India’s inclusion in to the index, they said. 

India’s addition to a major global gauge will give global investors greater access to the world’s fastest-growing large economy that offers some of the highest returns in the region. The inclusion may also prompt flows of as much as $30 billion, according to HSBC Holdings Plc. 

Expectations that India may be added to international gauges had been rising in recent months as providers look to diversify index constituents. Russia’s invasion of Ukraine had seen it drop off indexes, while China’s worsening economic woes have taken the shine off the country’s sovereign debt.

That left India as the world’s last big emerging market that hasn’t joined others like China on the global debt indexes. 

Authorities in India have been largely uncompromising in making changes to tax policies that would make it easier for the securities to be added to global indexes. Korea, another large emerging market, signed an agreement to open an omnibus account with Euroclear Bank SA, facilitating foreigners’ access.

Still, JPMorgan in March said that support for adding India’s index-eligible, high-yielding government bonds had risen to 60% in its survey, up from 50% in the previous year.

Foreigners have raised their holdings of such bonds to almost $12 billion, from $7.4 billion at the end of 2022, in anticipation of the inclusion, according to Clearing Corp. of India data. 

FTSE Russell, another major index provider, has the nation’s bonds on index watch for inclusion in its emerging market gauge.  

Elsewhere, Egypt has been placed on negative watch due to the material currency repatriation hurdles reported by investors, JPMorgan said. The country’s index eligibility will be assessed over the next three to six months, it said.

Bloomberg LP is the parent company of Bloomberg Index Services Ltd, which administers indexes that compete with those from other service providers.