Indian government bonds and the local currency reacted calmly to the news.
FTSE Russell, a global index provider, announced on Friday that India will not yet be included in a government bond index, despite JPMorgan’s announcement last week that India would be included in its influential GBI-EM index suite beginning next year.
“Areas for improvement in the Indian government bond market structure highlighted by international investors remain largely unchanged from the previous March 2023 review,” according to FTSE’s annual country classification review for the FTSE Emerging Markets Government Bond Index (EMGBI).
Indian government bonds and the local currency reacted calmly to the news.
The rupee was marginally higher at 83.1000 to the US dollar, having closed at 83.1850 on Thursday, while the benchmark 7.18% 2033 bond yield fell three basis points to 7.2126%, down from 7.2414% at the end on Thursday.
“Expectations of inclusion in the FTSE index were not very high, so local markets may not react strongly, and we do not expect any significant impact in terms of flows,” said VRC Reddy, treasury head at Karur Vysya Bank.
According to Jean-Charles Sambor, head of developing markets, fixed income at BNP Paribas Asset Management, the JP Morgan inclusion caused BNP Paribas Asset Management to become “more positive” on Indian bonds.
Sambor anticipates that the benchmark bond rate would go below 7% by the end of the year, and that the rupee will fall to 82.00-82.25 per US dollar in six months.
