India’s financial markets had factored in the likelihood a mid-July review would facilitate the inclusion of Indian sovereign bonds on the Global Aggregate index, which is tracked by a broad swathe of asset managers from Tokyo to Toronto for allocation of patient, long-duration funds. It is one of the world’s most widely followed investment-grade bond benchmarks, tracking more than $70 trillion worth of bonds.
Bloomberg Index Services (BISL) said Friday that Indian operational and market-infrastructure required further evaluation before the inclusion of the debt instruments in a flagship global investment grade index.
The inclusion of Indian government bonds in Bloomberg’s Global Aggregate Index has been deferred yet again, as the company requires additional evaluation of both operational and market infrastructure components. This setback could lead to an immediate uptick in sovereign bond yields, surprising investors who were hopeful for increased foreign capital inflow. Meanwhile, Indian bonds remain part of various other emerging market debt indexes.
“These considerations include, among others, the current lack of fully automated trading workflows, settlement and repatriation timelines associated with post-trade tax processes, and the complexity and duration of fund registration procedures,” BISL said.Expectations were high following coordinated government and monetary-authority measures the markets believed would build a strong business case for inclusion of Indian bonds on the gauge.
ET BureauCalls for further evaluation; deferral may cause G-sec yields to rise
Also Read: NSE pays Rs 715 crore to settle pending Rs 1,491-crore co-location case ahead of IPOMarket was Running on Expectation Estimates of inflows varied, but even the most conservative among analysts had penciled in $10-15 billion of inflows during the phase-in window itself.
“The market was running on expectations that Indian government bonds will be included in the Bloomberg index,” said Vijay Sharma, senior executive vice-president, PNB Gilts. “Since this has not happened, the markets could witness a sell off by 8-10 basis points.”
One basis point is a hundredth of a percentage point.
Targeted Measures
For its part, the Indian government had waived taxes on capital gains and interest on investment returns. The Reserve Bank of India (RBI), meanwhile, had also expanded the eligible investable universe for overseas funds to include long-duration bonds that stretched maturities running up to 30 years.
Tax exemptions on interest income and capital gains have been a key factor in Bloomberg’s consideration of including Indian bonds in its index and the inclusion of Indian debt in the gauge have driven the recent rally in the bond market.
The 10-year bond yield had softened 26 basis points in June, when overseas funds poured record money into Indian government bonds.
Foreign portfolio investors (FPI) poured in a record Rs 55,518 crores in June into these instruments, with the inflows generally driven by expectations that an announcement on the country’s inclusion in the Bloomberg bond index is imminent.
Yields on the 10-year benchmark government bond closed at 6.83% on Friday, up two basis points from its previous close. Bond dealers expect yields to trade around 6.90% on Monday.
Goldman Sachs had said in a recent report that it expected $15 billion passive inflows in the phase-in period after the highly anticipated inclusion announcement.
Indian bonds are already part of three major emerging-market debt indexes – the JP Morgan EM index included in June 2024, Bloomberg EM index included in January 2025 and the FTSE Russel EM index included in September 2025.
After the inclusion, FPIs invested over Rs 22,000 crores in a single month, the highest at the time, CCIL data showed.
