Below are Indian bond markets on their watch list for a possible inclusion in its FTSE Emerging Government Bond Index by Madhavi Arora, Lead Economist, Emkay Global Financial Services
Please find appended below the perspective note by Madhavi Arora, Lead Economist, Emkay Global Financial Services on FTSE Russell placing Indian bond markets on their watch list for a possible inclusion in its FTSE Emerging Government Bond Index.
This process of India's global bond inclusion is unlikely to start before next fiscal year. That said with India having created enough FX buffers, it might think of further easing capital account convertibility Norms in coming years if global market remain sane which could fasten the process.
We note China has now been included in FTSE WGBI which is expected to have a larger effect due to the size of passive flows tracking the index. China is likely to get USD 130bn bn for a 5.5% share in FTSE WGBI in a period of 36 months. China's inclusion in FTSE WGBI comes after its inclusion in Bloomberg-Barclays Global Aggregate Index (BBGA) and JP Morgan Emerging
Market Government Bond Index (GBI-EM).
For India, the inclusion is being talked about for FTSE EMBI and not WGBI. The expected quantum of flows in India will depend on the % allocation to us. We note FTSE is a much smaller space than Bloomberg Barclays and JPM EMGBI when it comes to EM bond index, albeit a much bigger space in World bond index (WGBI) with wider passive investor following.
Additionally, FTSE planning on floating India FAR securities bond index won't change much for the debt flows, given India remains one of the lowest Real rates offerer in EM space to global Investors. FAR securities were introduced last year by the Indian Govt in a bid to increase foreign interest and removes all restrictions on foreign ownership for all new gsec issuances of 5,10,30 yr tenors.
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