JPMorgan adds India to its emerging market bond index

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

JPMorgan Chase & Co. will add Indian government bonds to its emerging markets benchmark index, a highly anticipated event that could drive billions of foreign inflows into the country’s debt market.

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

The inclusion in the index follows “the Indian government’s introduction of the FAR program in 2020 and substantial market reforms to assist foreign portfolio investments,” the team led by global head of research at company indexes, Gloria Kim. Nearly three-quarters of benchmark investors surveyed were in favor of India’s inclusion in the index, they said.

India’s addition to a major global indicator 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 listing could also generate flows of up to $30 billion, according to HSBC Holdings Plc.

Expectations that India could be added to international indicators have risen in recent months as providers seek to diversify the index’s components. Russia’s invasion of Ukraine sent its indices tumbling, while China’s worsening economic problems took the shine off the country’s sovereign debt.

That left India as the world’s last major emerging market that has not joined others like China in global debt indices.

Indian authorities have been largely intransigent in making changes to tax policies that would make it easier to incorporate securities into global indices. Korea, another large emerging market, signed an agreement to open an omnibus account with Euroclear Bank SA, facilitating access for foreigners.

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

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

FTSE Russell, another major index provider, has the country’s bonds under surveillance for inclusion in its emerging markets gauge.

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

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