The deferral comes as steps to attract overseas capital have propelled a rush of flows into the nation’s index-eligible bonds.
Bloomberg Index Services Ltd has held back from adding India’s debt to its global aggregate bond index, citing investors’ request for more time before inclusion.“Many market participants would like to see these enhancements become more firmly established in day-to-day market practice before a decision is made on index inclusion,” the index provider said in a statement. It referred to recent moves by Indian authorities to improve market access as well as the country’s decision to recently remove withholding and capital gains taxes for foreign investors in government bonds.The index provider will continue to engage with market participants and give a further update as the review progresses, it said.Bloomberg LP, which offers index products for various asset classes through BISL, is also the parent company of Bloomberg News.Even as automated trading capabilities in India’s bond market continue to expand, index respondents noted that implementation has not yet been fully completed across all major investor regions, BISL said. Additionally, a number of respondents indicated they would like to see further evidence that recent market reforms translate into more efficient operational workflows, it said. These include improvements to account opening and processes for adding foreign investors.Indian bonds are likely to see selling on Monday on disappointment over the development, traders said. “A selloff of around 5-10 basis points can be expected in the bond market on Monday because a lot was riding on the index inclusion and those hopes have been belied,” said Rajeev Pawar, head of treasury, Ujjivan Small Finance Bank. “The swap market could be affected too.”Benchmark 10-year yields closed three basis points higher at 6.84 per cent on Friday. Yields are up nine basis points in July after dropping the most in six years in the previous month. BISL said the Indian government bond market continues to make meaningful progress toward meeting the standards expected for inclusion. “Given the significance of recent market enhancements and the importance of ensuring they are fully reflected in day-to-day market practice, BISL believes additional time is warranted for these developments to become more firmly established before making a decision,” it said.The deferral comes as steps to attract overseas capital have propelled a rush of flows into the nation’s index-eligible bonds. Foreigners have invested $5 billion in such debt since the tax cut was announced on June 5, with the numbers inflated by the addition of some new bonds in the category.Local bonds have been hostage to swings in oil prices, with the nation importing more than two-thirds of its requirement. Brent crude surged past $120 a barrel in end-April before easing on the peace deal between the US and Iran. A resumption in hostilities has seen energy prices rise again.India is already part of JPMorgan Chase & Co’s flagship emerging market bond index. It has also been added to Bloomberg’s and FTSE Russell’s emerging-market gauges. More stories like this are available on bloomberg.comPublished on August 1, 2026
