JPMorgan Chase & Co. plans to integrate Indian government bonds (IGBs) into its benchmark Emerging Market index from June 28, 2024. According to a note from JPMorgan, India is anticipated to reach a maximum weight of 10 percent in the Global Diversified Index (GBI-EM GD). The incorporation of IGBs will be carried out gradually over ten months, concluding on March 31, 2025, with a monthly inclusion of 1 percent weightage. As per the JPMorgan note, there are currently 23 IGBs with a collective notional value of $330 billion that qualify for inclusion in the index.

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Jose Perez-Gorope, Head of Research & Emerging Markets at S&P Global Ratings thinks this is a positive move.

“It is a relevant step. Usually when a country gets included into these indexes, there is a boost in the inflow of foreign investors into domestic government bonds because other indexes will be tracking these indexes and entering and including their positions in Indian bonds,” he said.

However, he believes the impact will be gradual, and is very hard to estimate the magnitude of the complete effect of inclusion in this particular index.

When asked about how much can foreign participation go up in both percentage terms as well as in value, he replied, “It is hard to say. When you look at the other peers in global markets, it also depends on how the government manages the whole inflow. What we have seen in other emerging markets is that this participation could go up from 20% to 30%.”

At this point, he wouldn’t set these thresholds for India. “In our own report, we did make a projection that if it gets to 10%, it would be relevant for corporates,” he explained.

In August, Morgan Stanley had projected that Indian bonds had the potential to become part of two of the three global bond indexes, including one from JPMorgan that tracks emerging markets. This inclusion was anticipated to attract inflows of approximately $40 billion. HSBC, on the other hand, foresaw this development leading to inflows of around $30 billion.

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(Edited by : Shweta Mungre)