Won’t be surprised if more global indices include Indian bonds: JP Morgan’s Aziz

Jahangir Aziz, head of emerging market economics at JP Morgan.

JP Morgan’s decision to include Indian bonds in its Government Bond Index-Emerging Markets (GBI-EM) should pave the way for more indices to follow suit, says Jahangir Aziz, head of emerging market economics at JP Morgan.

“I wouldn’t be surprised if in the next few months, you get other bond indices announcing that India bonds are included,” Aziz told Moneycontrol in an interview.

JPMorgan Chase & Co on September 22 said it would include Indian government bonds in its GBI-EM global index suite from June 2024. India's weight in the index will progressively increase to 10 percent by March 2025.

“JP Morgan’s GBI-EM is the key bond index among foreign investors, and once you pass that hurdle, I think there are several other bond indices where entry is probably now much easier,” Aziz added.

The development has fuelled expectations that other key index providers will follow suit and billions of dollars would trickle into India through its sovereign debt market. To be sure, though another key benchmark provider, FTSE Russell, held off from including Indian bonds in its index as announced on September 29, speculation is rife that the Bloomberg Global Aggregate Index may take the JP Morgan route.

Media reports back in September said that top US fund managers are keen to have India on the Bloomberg index and have urged a scheduled review to be advanced to early October so that the decision can be brought forward by a quarter.

Investors also said that neither New Delhi’s domestic delivery and payment system for settlements nor the Euroclear settlement would pose a hindrance, according to the reports.

The Indian government had in the past been in discussions with Euroclear on settling bonds that get listed on global indices on their platform offshore. But the Belgium-based platform opposed taxes on capital gains because calculating them posed issues for its systems.

Being Euroclear-compatible, however, is not mandatory to be listed on global bond indices.