Not too 'FAR': India set to enter Bloomberg index on FPI thumbs up

Formal call likely in Jan; inclusion may trigger $25 billion inflows

India’s chances of entering the Bloomberg Global Aggregate Index have strengthened after large foreign portfolio investors (FPIs) gave positive feedback on the country’s bond market operations, with an official announcement expected as early as January 2026, said people aware of the development.

 

Bloomberg Index Services had sought investor feedback on the inclusion of India’s fully accessible route (FAR) government bonds in its flagship Global Aggregate Index, tracked by nearly $3 trillion of passive assets. According to multiple investors involved in the consultations, leading global asset managers following the index have endorsed India’s entry, citing improved market access and operational comfort.

 

They said that India offers two clear draws for global bond buyers: Higher yields than peers like China, the yield on whose 10-year government bond is now at 1.8 per cent-1.9 per cent; and an exchange rate around 88.6 per dollar, which is seen as an attractive entry point by foreign investors.

 

“Most of the big FPIs who already transact in Indian government securities have said India should be included. The official inclusion announcement is expected in January. India remains attractive to global investors because its government and corporate bond yields are significantly higher than those of other emerging markets such as China. Also, the current exchange rate offers a compelling entry point,” said a person familiar with the discussions. 

 

In September, Bloomberg Index Services started the process of seeking investor feedback on whether Indian government securities should be included in its flagship Global Aggregate Index. 

 

India is currently being evaluated for a potential weighting of around 1 per cent in the index, an allocation that could translate into $25 billion of inflows, spread over roughly 10 months, if admitted. The feedback window closes on November 30, after which Bloomberg Index Services is expected to review inputs and take a formal inclusion call in January.

 

The country was added to the JPMorgan Emerging Market Bond Index two-and-a-half years ago, generating around $25 billion in inflows since. The potential Bloomberg index inclusion would mark another significant step in India’s integration into global bond portfolios, though timelines for actual index entry could stretch 10 months-12 months after the decision, according to background notes shared with investors.

 

Bloomberg Index Services had earlier said inclusion would depend on feedback on accessibility, settlement mechanisms, and remaining operational gaps. With most large FPIs now expressing confidence in India’s processes, the market is increasingly expecting a favourable outcome once the index provider completes its review.

 

Indian government FAR securities are already included in the Bloomberg Emerging Market (EM) Local Currency Government Index with an initial weighting of 10 per cent of their full market value as on January 31, 2025.

 

Bond market participants said that if the announcement comes in January, the actual inclusion would begin only after a few months. As a result, the inclusion process would start much later; however, it is still expected to ease yields by 4 basis points-5 basis points.

 

“Around $20 billion-$25 billion is expected. So obviously, there will be new money that will be coming into the market. That it should have a soothing effect on the yields,” said Vijay Sharma, senior executive vice-president at PNB Gilts. “The actual inclusion will start much later. Nonetheless, it should have at least 4-5 basis points on the yields,” he added.

 

When JPMorgan announced in September 2023 that Indian bonds would be phased into the index starting June 28, 2024, and reaching the full 10 per cent weighting by March 31, 2025, at 1 per cent per month, analysts predicted passive inflows of $20 billion-$25 billion, with bullish scenarios extending up to $30 billion when including active repositioning. Much of the inflow occurred in the months leading up to the actual inclusion between September 2023 and June 2024, net inflows stood at approximately ₹92,302 crore. This indicated significant front-loading by investors who anticipated the move and adjusted their portfolios ahead of schedule.

 

Between June 2024 and March 2025, total foreign purchases under the FAR route had reached ₹1.09 trillion, or around $14 billion.