Mumbai: Top US funds have urged managers of the Bloomberg Barclays Emerging Markets bond index to advance a scheduled review to early October so that a decision on India, now featuring on the competing JP Morgan gauge, can be brought forward by a quarter to give bulge-bracket investors tracking the benchmark an option to incrementally buy about $25 billion of bonds issued by one of the least indebted major economies.
A couple of large US-based firms are at the forefront of the group of investors that made the review rescheduling demand as JP Morgan’s decision last week threatens to reduce competitiveness of the Bloomberg Barclays Global Aggregate index, sources aware of the development told ET.
Furthermore, these investors haven’t even linked the potential inclusion to trade settlement on an international platform, reflecting India’s increasing relevance for global indices that must recast themselves to reflect exclusion of Russia and tepid growth in China.
Tax Talks
“The investors have communicated to Bloomberg Barclays that they do not have a problem with the domestic delivery and payment system of settlement and that the Euroclear settlement is not a hurdle either,” a source said.
Usually, managers of the Bloomberg Barclays index review the constituents and weights in the first quarter of a calendar year. Typically, overseas investments into instruments featuring on the gauge begin around nine months after the index inclusion is announced.
AUM Nearly Equals GDP
If included, India could be given a 0.8% weightage in the Bloomberg Barclays EM index, which has assets under management (AUM) of around $3 trillion. Such a weightage would imply overseas funds worth around $24 billion flowing into India’s government bond market.
“The push from the investors’ side is for the review to take place in early October. This is because after JP Morgan’s decision to include India in its index, the overall yields on its (JP Morgan’s) index have gone up and that relatively lowers the appeal of those tracking the Bloomberg Barclays index,” said the source cited above.
Banking industry sources said that as a precursor to index inclusion, discussions were necessary with the Indian authorities on certain aspects of taxation for overseas investors.
