Industry Updates

JP Morgan to add India to emerging market bond index

Long-awaited inclusion of the second-largest market in EM

Theo Andrew

India arch on beach

JP Morgan has added India government bonds to its emerging market global diversified index, a move that will result in significant flows into the market.

Some 23 India government bonds with a combined value of $330bn are now eligible for inclusion in the JP Morgan GBI-EM Global Diversified index.

JP Morgan said inclusion will begin in June 2024 with 1% increments on its weighting over 10 months, with a maximum weighting of 10%.

In 2021, the bank started talks with fund managers representing 85% of the – at the time – $240bn tracking its emerging market bond benchmark on whether to add rupee-denominated debt to its index.

Lee Collins, head of fixed income at Legal and General Investment Management (LGIM), commented: “As we have witnessed with other EM bond market inclusions, market participant support for inclusion tends to start tentatively and then builds over time as investors become more familiar with country-specific access requirements.”

He added the inclusion would result in “significant foreign investor inflows” into the market, with the asset manager launching the $536m L&G India INR Government Bond UCITS ETF (TIGR) in anticipation of the move in October 2021.

“Our view is that the market can offer an attractive yield, volatility and maximum drawdown levels that are more akin to lower yielding, higher rated issuers such as the US and China, as well as low levels of correlation to other emerging and developed market issuers,” Collins added.

DWS is the other ETF issuer in Europe to offer exposure to India government bonds through the Xtrackers India Government Bond UCITS ETF (XIGB) which has gathered $45m assets under management (AUM) since launching in September 2022.

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