Spotlight: India inclusion in JPM Global (EM) Bond Index

The Indian government has been exploring how to make its bond market more accessible to foreign investors for some time. A crucial part of this plan is to have its government-issued bonds included in widely recognised benchmark indices. Leading index provider JP Morgan has announced that Indian local currency bonds will be gradually added to its Global Emerging Markets (EM) Bond Index from June 2024. The bonds will be added at a weight of 1% every month until they reach the regional exposure cap of 10%.

India is the fifth largest economy in the world and has a large and liquid local debt market valued at over $1trillion (Source: BBG World Countries Debt Monitor, 2023). It has also had relatively low correlation with other developed and emerging market assets due to its exports and imports making up a relatively small proportion of its GDP (GDP is defined as the monetary value of all finished goods and services made within a country during a specific period), making it more resistant to global shocks versus other EM’s in particular. The Indian government had previously set limitations around the level of foreign ownership of its local debt (or government bonds). However, they have been actively working to remove obstacles that have prevented its bonds from being included in global indices. Inclusion in the index is expected to bring more money into the local market, making it easier for foreign investors to trade in. It also provides investors with a way to reduce risk through diversification across EM investments, by gaining access to a market that was previously difficult to enter.
Source: Reserve Bank of India website.

The ongoing robust expansion of the Indian economy (particularly post the COVID-19 pandemic) has supported the country's credit rating to date. Other factors including the size and demographic advantage of its population, relatively stable government, increasing digitalization of its economy, its expanding share of global manufacturing and spending power of its ever-growing middle-income households, further add to India’s attractiveness for investors.

The noise

  • Falling Treasury yields helped launch a strong rebound in stocks and lifted US government bonds from 16-year lows this week. Now, investors are worried that further declines in yields could keep the Federal Reserve in a hawkish stance, meaning they will look to keep interest rates high, potentially hurting asset prices over the longer term. Rising treasury yields sapped investors’ appetite for equities over the last few months helped by tightening financial conditions, as the Federal Reserve raised the cost of borrowing for companies and households.

  • While still-elevated inflation has forced central banks across developed markets to keep interest rates high, China is facing a different set of problems after it sank back into deflation in October. The consumer price index dropped 0.2% in October from a year earlier, as the price of pork has dropped 30.1% amid oversupply of pigs and weak demand. Though core inflation (excluding food and fuel) grew 0.6% in October, this is down from 0.8% in September as China continues to battle with disinflationary pressure.

  • BlackRock is set to invest $550 million in a direct air capture (DAC) project called STRATOS that is to be developed in Texas, with plans for it to be the largest such facility in the world. The investment will be through a joint venture with Occidental Petroleum Corp, with the aim to capture up to 500,000 tonnes of CO2 per year. The CO2 captured from the atmosphere will then be buried underground or used in the making of products such as concrete or aviation fuel. Occidental’s first large-scale DAC facility is a crucial test of the economics for a technology that could play a key role in decarbonising the global industry. At present the technology behind DAC is very costly, but both Occidental and Exxon Mobil estimate DAC could be a multi-trillion-dollar market for oil producers by 2050 as scale brings costs down.

The numbers

GBP Performance to 09/11/2023

Equity GBP Total Return

1 Week








MSCI Europe






MSCI Japan



MSCI Asia Pacific ex Japan



MSCI Emerging Market






Fixed income GBP Total Return


UK Government



Global Aggregate GBP Hedged



Global Treasury GBP Hedged



Global IG GBP Hedged



Global High Yield GBP hedged



Currency moves












Commodities GBP return








Source: Bloomberg, data as at 09/11/2023


The nuance

Britain’s languishing economy failed to grow in the 3 months from July to September, per figures from the Office for National Statistics published on Friday. This comes a week after the Bank of England said it expected the UK economy not to grow until 2025, though it is expected to avoid a recession. GDP was propped up by a fall in net imports, with consumption and business investment falling, with this netting out for no change. With the autumn statement on the horizon, stagnant growth and a weak outlook is putting pressure on the Chancellor of The Exchequer Jeremy Hunt to announce pro-growth measures.

Though the 14 back-to-back interest rate increases over the last two years have worked well to reduce inflation, it has also slowed economic growth by making it more expensive for businesses and consumers to borrow money. The economy however is still not weak enough to reduce inflation back to its 2% target, and as such expectations remain that we won’t see a cut in interest rates until mid-to-late 2024.

All investment views are presented for information only and are not a personal recommendation to buy or sell. Past performance is not a reliable indicator of future returns, investing involves risk and the value of investments, and the income from them, may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.

Any views expressed are based on information received from a variety of sources which we believe to be reliable, but are not guaranteed as to accuracy or completeness by atomos. Any expressions of opinion are subject to change without notice.

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