India has been placed on the watch list for potential inclusion in the FTSE Emerging Market Government Bond Index (FTSE EMGBI). The news sounds positive, but the FTSE Emerging Market Government Bond Index should not be confused with another FTSE Index, which is the World Government Bond Index. The World Government Bond Index has large AUM, but it needs AA rating, so it is largely a developed market index with one or two exceptions.
FTSE authorities have said that they have received feedback from global funds requesting that they would like to see India on the index.
According to Dariusz Kowalczyk, emerging market strategist at Credit Agricole CIB, FTSE putting India on the watch list for potential inclusion into the FTSE EMGBI is an important first step. "It was not expected the FTSE Russell would consider India and put it on the watch list. I think the potential inflows, once they decide to include G-Sec into the EMGBI will not be massive, maybe USD 10 billion, but it is an important first step," he said.
"Inflows into Indian bonds won't be huge, but what matters is that the major indices are now starting to talk about Indian Government Bonds being included and once the process gets rolling eventually its likely to lead an inclusion into major indices," said Kowalczyk.
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