Russia out, India in: global bond index may include a new member shortly
Following the Russian invasion, Morgan Stanley, Goldman Sachs and JPMorgan may add India into the indices to close the gap
India is the largest emerging market bond market that is not included in global indices, but bankers predict this will soon change, potentially attracting billions of dollars in inflows. One of the causes is the recent ousting of Russia.
Inclusion of India in JP Morgan & Chase Co.’s emerging markets bond index is expected to be announced as early as mid-Septemeber, with the actual entry taking place in the third quarter of the following year.
The announcement is anticipated to be made in the fourth quarter of the year and the second or third quarter of 2023. India will most likely have a 10% weight in the index, the most allowed for a nation, and the change may result in $30 billion in inflows.
The third largest economy in Asia with a $1 trillion debt market would be more accessible to foreign investors if high-yielding Indian sovereign bonds were included in global indices.
After numerous failed attempts over the years brought on by concerns about debt inflows and debates, it’s possible that the JPMorgan gauges’ exclusion of Russia following its invasion of Ukraine provided additional motivation for the index creators to cover the gap with Indian debt.
More than 60% of real money investors are either ready or almost ready for India to be included.
Given the unique economic structure of India, the country would provide the GBI-EM index with much-needed diversification, making it a strong addition to the index in the long run.
Russia had had a weight of around 8% in the GBI-EM index before it was eliminated; presently, seven nations have weights of 10% each, and 13 countries split the remaining 30%.
