FTSE puts India, Saudi on watchlist for inclusion in its bond index

FTSE puts India, Saudi on watchlist for inclusion in its bond index

By Administrator_ India

Capital Sands

India’s efforts to include its bonds in global bond indices could fructify soon with FTSE Russell placing Indian and Saudi Arabian government bond markets on the watchlist for possible inclusion in its FTSE Emerging Government Bond Index.

FTSE Russell’s semi-annual country classification review released on Monday said the market accessibility level of Indian and Saudi Arabian bonds will be considered for reclassification to 1 from 0.

Global index users have shown interest in Indian government securities issued through the Fully Accessibility Route (FAR), FTSE said, adding that it will start a version of its FTSE Indian Government Bond Index that tracks these securities in coming weeks.

The government and the Reserve Bank of India (RBI) have included a number of bonds that would qualify for the FAR route where foreign investors can invest without any limit. The government first notified this in the Budget for FY20-21, and the central bank subsequently April notified five securities to be eligible for the list. Together, they had an outstanding of Rs 4.2 trillion. Since then, “all-new issuances of government securities of 5-year, 10-year, and 30-year tenors from the financial year 2020-21” were eligible as “specified securities” where foreign investors can take full exposure without any limit, along with resident individuals.

Technically, these securities are over and above the FPI investment limit in the domestic market. The RBI in April raised the FPI limits for corporate bonds to 15 percent, from 9 percent, for 2020-21. However, the overall FPI limit in government securities remained unchanged at 6 percent.

If the bonds get included in the global bond index, foreign investors could pour in huge amounts of money in the Indian markets considering the high yields on offer, with relatively stable political stability and a strong repayment track record.

The index provider said it has been in talks with index users and regulators in Saudi Arabia to understand the market structure and investors’ experience. It will continue this interaction before its next country classification review in September 2021, it said.

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