Bloomberg to include India FAR Bonds to EM local currency index from Jan 2025

Bloomberg on Tuesday said India Fully Accessible Route (FAR) bonds will be included in the Bloomberg Emerging Market (EM) local currency government index and related indices from January 31, 2025. FAR bonds are debt instruments that allow foreign investors to invest in specified government of India dated securities. The move is likely to infuse billions of dollars in India's sovereign debt market as investments in FAR bonds are not subject to any ceilings.  

Indian FAR bonds will be included in the Bloomberg EM Local Currency Government indices over a ten-month period, starting January 31, 2025, with an initial weight of 10% of their full market value as on January 31, 2025, Bloomberg says in a release.

The decision to include India FAR Bonds in the Bloomberg EM Local Currency Government Index was taken following a period of extensive consultation to solicit feedback from market participants and stakeholders. On January 8, Bloomberg Index Services Limited (BISL) started a consultation to get feedback on the proposed inclusion of the India FAR bonds in the Bloomberg EM local currency index.

The weight of FAR bonds will be increased in increments of 10% of their full market value every month over the ten-month period ending in October 2025, at which point they will be weighted at their full market value in the indices.

“This is an important marker in the development of India’s financial markets and a reflection of India’s growing importance to the global economy,” says Michael R. Bloomberg, founder of Bloomberg LP. “India’s continued emergence as a global financial center promises to be one of the most significant economic developments of this decade, and Bloomberg is committed to bolstering it by connecting more investors to India.”

The indices in scope for inclusion include the Bloomberg EM Local Currency Government Index, the Bloomberg EM Local Currency Government Index 10% Country Capped Index, and all related sub-indices, the release notes.

The release notes that once completely phased into the Bloomberg Emerging Market 10% Country Capped Index, India is expected to join both China and South Korea as markets that reach the 10% cap. Within the market cap weighted version of the index, India is expected to be the third largest country after China and South Korea. Using data as of January 31, 2024, the index would include 34 Indian securities and represent 7.26% of a $6.18 trillion index on a market value weighted basis.

“The Indian economy is on a steady growth trajectory and inclusion of Indian FAR Bonds in our Emerging Market Local Currency Government Index marks a key milestone amidst the measures India has taken to open its bond markets. Bloomberg Indices is committed to serving the global investment community and this development will increase access to, and participation in, Indian markets,” says Nick Gendron, Global Head of Fixed Income Index Product, Bloomberg Index Services Limited (BISL).

Bloomberg Indices will create an ex-India version of the EM Local Currency Government Index and can also create other standard and custom versions of the index. Bloomberg provides an independent, transparent approach to indexing for customers across the globe.