Impact Will India’s Bond Index Inclusion Have On the Weight Cuts

JP Morgan India Bond Index inclusion announcement leads to several discussions all over the country among the investors. There is an increase in Indian bond investment overall. Apart from that, it may have an impact on the other countries’ emerging markets. Countries like Thailand, Poland, and Czech’s emerging markets will have a cut in the weights in the JP Morgan Emerging Market Bond Index. Why there is a cut in the weights? Let us discuss everything below in detail.

India Bond Index Inclusion In JP Morgan Index’s Impact

JP Morgan Index refers to an index that helps in the tracking of government debts and corporate bonds. The Indian Bond Index is going to add up to the JP Morgan Index. There will be an impact of this inclusion in the index. According to details, the weight of several other indexes and countries will reduce to adjust India in it. India will have a 10% weight in the GBI EM Index. Every EM peer will reweight their percentage.

HSBC analysts release the details. If we talk about the inflows, there is an inflow of $10.4 Billion from the inclusion after the announcement. For the year 2023 in eight months, the inflow was $2.4 billion. While the foreign outflows of $1 Billion. The Indian government securities will include the index from 28 June 2024 which is Gsec. It will impact the weightage of other countries. However, the effect will not be much.

There is around $8.3 billion of foreign investment inflow. The Gsec market has a worth of $1.3 trillion. In conclusion, the Gsec will soon be included in the index. However, there are 38 FAR issues. In conclusion, the JP Morgan India bond Index is known for including the Indian Government Securities (G-sec) in the index. The weight cut will be most preferably for the 3 emerging markets. It includes the EM of Thailand, Poland, and Czech.

India will have a 10% weight in the Index. There are several EM that already have 10% weight. These are CNY, BRL, MXN, IDR, and MYR. There are a lot of things that impact the inflow and outflows. The inflows is $10.4 billion from the announcement of inclusion. While the annual foreign outflows are $1 billion. Gsec is $1.3 trillion with 112 securities. More investment was driven towards Indian securities after the announcement of the inclusion. Thus, there are expectations that the Gsec will have more investments in the future after its inclusion. Stay tuned for more information on our website.