J.P. Morgan to Add India to Emerging-Market Bond Index

J.P. 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 $330 billion are now eligible for inclusion in the JP Morgan GBI-EM Global Diversified index.

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

J.P. Morgan Started Talks in 2021

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

 “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,” Lee Collins, head of fixed income at Legal and General Investment Management, said.

He added the inclusion would result in “significant foreign investor inflows” into the market, with the asset manager launching the $536 million 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 U.S. and China, as well as low levels of correlation to other emerging and developed market issuers,” Collins said.

DWS is the other ETF issuer in Europe that offers exposure to India government bonds. It does so though its Xtrackers India Government Bond UCITS ETF (XIGB), which has gathered $45 million in assets under management since launching in September 2022.