Global financial services major JP Morgan has decided to include Indian government securities (G-Secs) in its emerging market bond index - a move seen to boost dollar inflows into the country and bring down the rate of interest. This is the first time Indian G-Secs have been added to a major global bond index.
JP Morgan said India’s G-Secs will be incorporated in three of its bond indices consisting of similar instruments issued by the governments of emerging markets like China and Indonesia from June 28, 2024. Beginning with 1% weightage, over the next 10 months till March 2025, the weight of Indian G-Secs would rise to the maximum 10%.
Since the index is widely followed by global bond fund managers, some estimates say $40-45 billion funds could flow into India because of this inclusion between June 2024 and March 2025.
According to bond market players, the incremental buying of Indian G-Secs by global funds would lead to a fall in yields which, in turn, would bring down the government’s cost of borrowing. Also, since gilt yields are benchmarks for yields on corporate bonds and the market rate of interest, it could result in a lower cost of borrowing for companies.