Indian govt bonds are now part of JP Morgan's index. Here's how much money this could bring in

India is poised to receive billions of dollars in investments as JPMorgan Chase & Co includes Indian government bonds in its emerging markets index. This opens up a $1.3 trillion market to a broader range of global investors.

Since JPMorgan's announcement in September, nearly $11 billion has already flowed into eligible bonds. The bank anticipates an additional $20-25 billion in the next ten months, potentially increasing foreign ownership of Indian bonds from 2.5% to 4.4%.

India's debt market is gaining popularity among investors, with both sovereign and corporate bonds set for a sixth straight quarter of foreign investments, a streak not seen in over a decade, according to Bloomberg.

The JP Morgan Emerging Market Bond Index, established in the early 1990s, is the most widely referenced index for emerging market bonds. It started with the issuance of the first Brady bond and has since expanded to include the Government Bond Index-Emerging Markets and the Corporate Emerging Markets Bond Index.

Only Indian Government Bonds issued under the Reserve Bank of India's 'Fully Accessible Route' are eligible for inclusion in the indices. These bonds must have a minimum outstanding amount of over $1 billion and at least 2.5 years of residual maturity, making all FAR-designated IGBs maturing after December 31, 2026, eligible.

India's inclusion in the JP Morgan Emerging Market Global Diversified Index is expected to result in $23.6 billion in inflows into FAR bonds. Foreign Portfolio Investor (FPI) holdings of outstanding FAR bonds could rise to 3.4 percent by April/May 2025.

The inclusion of Indian government bonds will likely reduce the weights of Thailand, Poland, and the Czech Republic in the JP Morgan Emerging Market Bond Index over the next ten months. Since the announcement on September 21, 2023, Indian government bonds have seen $10.4 billion in inflows, compared to just $2.4 billion in the first eight months of 2023 and annual foreign outflows of around $1 billion in 2021 and 2022.