JP Morgan Chase and Company (JPM) has confirmed that it will add Indian government bonds to its benchmark emerging markets bond index starting from 28th June 2024.
- India’s local bonds will be included in the Government Bond Index-Emerging Markets (GBI-EM) index
Key points
- The move will encourage more foreign investment in the domestic debt market.
- 23 Indian Government Bonds (IGBs) with a combined notional value of 330 billion dollars are eligible for it. All fall under the category of ‘fully accessible’ for non-residents.
- India will have a maximum weight of 10% on the index.
- The inclusion could bring in over 26 billion dollars of passive inflows into the country.
- This will lower India’s risk premia and cost of funding, enhance the liquidity and ownership base of government securities (G-Secs) and help India finance its fiscal and CAD.
- The Indian government’s introduction of substantive market reforms for aiding foreign portfolio investments is said to be one of the reasons behind JPM’s decision.
- Exclusion of Russia and troubles in China, is other factors considered by global debt investors to deepen bond market in India.
- The inclusion of Indian government bonds in JP Morgan’s emerging market debt index is expected to broaden India’s investor base, potentially appreciate the rupee, and make it easier for Indian financial institutions to lend money.
- JP Morgan Chase and Company is a leading international banking and finance company with its operations spread over in more than 200 countries.
- As the largest of Big Four banks, the firm is considered systemically important by the Financial Stability Board.
