Bloomberg to add India to emerging market bond indices

Bloomberg has said that said it will add the India Fully Accessible Route (FAR) bonds in its Bloomberg Emerging Market (EM) Local Currency Government Index from 31 January next year.

India FAR bonds are a category of government securities accessible to foreign investors without any restrictions, including on the amount that can be invested.

Indian FAR bonds will be included with an initial weight of 10%of their full market value on 31 January 2025, and will be increased in increments of 10% every month till October, at which point they will be weighted at their full market value (100%) in the indices, Bloomberg said.

The introduction of the bonds is likely to integrate the Indian bond market more closely with the global financial system, attract long-term foreign capital, and reduce the cost of borrowing for the government by broadening the investor base.

“The Indian economy is on a steady growth trajectory and inclusion of Indian FAR Bonds in our Emerging Market Local Currency Government Index marks a key milestone amid the measures India has taken to open its bond markets. Bloomberg Indices is committed to serving the global investment community and this development will increase access to, and participation in, Indian markets,” said Nick Gendron, global head of fixed income index product at Bloomberg Index Services Limited.

The bonds will be added to a suite of Bloomberg indices including the Bloomberg EM Local Currency Government Index, the Bloomberg EM Local Currency Government Index 10% Country Capped Index, and all related sub-indices.

Once completely phased into the Bloomberg Emerging Market 10% Country Capped Index, India is expected to join both China and South Korea as markets that reach the 10% cap.

Within the market cap weighted version of the index, India is expected to be the third largest country after China and South Korea. Using data as of 31 January 2024, the index would include 34 Indian securities and represent 7.26% of a $6.18 trillion index on a market value weighted basis.

“This is an important marker in the development of India’s financial markets and a reflection of India’s growing importance to the global economy,” said Michael R. Bloomberg, founder of Bloomberg LP. “India’s continued emergence as a global financial center promises to be one of the most significant economic developments of this decade, and Bloomberg is committed to bolstering it by connecting more investors to India.”

The decision to include India FAR Bonds in the Bloomberg EM Local Currency Government Index was taken following a period of extensive consultation to solicit feedback from market participants and stakeholders.

Bloomberg Indices will create an ex-India version of the EM Local Currency Government Index and can also create other standard and custom versions of the index.