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FTSE puts India on watchlist for possible inclusion in global debt index

FTSE puts India on watchlist for possible inclusion in global debt index

FTSE puts India on watchlist for possible inclusion in global debt index
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By CNBCTV18.com Mar 30, 2021 2:16:50 PM IST (Published)

FTSE said global index users have shown an interest in Indian sovereign securities issued through the Fully Accessibility Route.

In a move that may usher inflow of billions of dollars into rupee securities, FTSE Russell, the world’s leading provider of index benchmark, has placed the Indian government bonds on the watchlist for possible inclusion in one of its major global debt indexes, reports Bloomberg.

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This was announced during the FTSE’s semi-annual country classification review, released on Monday.
According to the Bloomberg report, Indian bonds would be considered for addition to the FTSE Emerging Markets Government Bond Index. Their market accessibility would be reviewed for reclassification from “0” to “1”, putting them at the minimum level needed for inclusion, the index provider said.
The FTSE announcement is an acknowledgment of India’s efforts to liberalize its sovereign bond market, with the government seeking more foreign investment to help finance the country’s fiscal deficit.
The announcement will help “ensure greater investment in debt markets and in the longer term, it would impose greater fiscal discipline on government finances,” said Sanjay Mathur, chief economist for Asean and India at Australia and New Zealand Banking Group Ltd in Singapore.
Dariusz Kowalczyk, a senior emerging-market strategist at Credit Agricole CIB in Hong Kong, said in an initial estimate, the inclusion in FTSE’s index might attract about $10 billion of inflows into rupee securities.
“There should be an impact on the rupee and government securities today, but nothing major, as actual inclusion is probably years away. This is because the inclusion was not fully priced in, and often active money front runs passive money,” he said.
FTSE said global index users have shown an interest in Indian sovereign securities issued through the Fully Accessibility Route, a new category of debt sales introduced by the government last year without foreign ownership restrictions. The index provider added it would start a version of its FTSE Indian Government Bond Index that tracks these securities in the coming weeks.
India is also reportedly seeking to join JPMorgan Chase & Co.’s global bond indexes, looking forward to securing a 7 percent weighting in the gauges.
FTSE also placed Saudi Arabian government bonds on its watchlist for possible inclusion in its Emerging Markets Government Bond Index.
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