The news of JPMorgan Chase’s decision to trim India’s weight in its flagship GBI-EM Global Diversified Index from 10% to 9% has not deterred the market. Market participants believe that it will have a limited impact. Vishal Goenka, Co-founder of Indiabonds, said, “The total FAR investments in government bond markets imply more than adequate headroom for index investments, and reduction by 1% will not impact inflows.” Further adding that “with the recent country upgrade and US rates headed down, India becomes a value interest rate choice destination for foreign investors.” As of September 16, the investment via fully accessible route (FAR) stood at 3.01 trillion, up 2% from Rs 2.95 trillion as on August 30, 2025.
Limited impact despite index recalibration
The recalibration, set to be phased in during the first half of 2026, is part of a broader move to reduce concentration risk and enhance regional diversification across the index. While the adjustment will marginally redirect passive flows toward smaller EM economies like Thailand, Poland and South Africa, analysts say India’s fundamentals remain compelling. The country’s recent sovereign rating upgrade, coupled with expectations of easing US interest rates, continues to position India as a preferred destination for global fixed-income investors.
India’s inclusion in the JPMorgan index last year marked a milestone in its integration into global bond portfolios. Despite the marginal rebalancing, experts believe India’s improving macroeconomic stability, policy reforms, and deepening investor base will continue to attract sustained capital flows, reinforcing its position as a core EM debt market.
Bond market resilience and outlook
“A 1% cut won’t result in a significant amount of G-Sec market outflow, said Dhiraj Nim, economist & forex strategist at ANZ Bank, who feels market sentiments may have some bearing. “Indian bond markets are currently underpinned by fiscal worries. Although this is not a major problem, it will just exacerbate that worry,” he adds.
It’s been slightly over a year since Indian bonds were included in the JP Morgan emerging market index. The inclusion was completed in March 2025. Though a huge chunk of foreign inflows was expected from the index inclusion, experts were of the view that inflows fell short of the projections.
The Indian government bond market saw a heavy sell-off by foreign investors in the first quarter of FY26, leading to a net outflow of Rs 24,180 crore. Though foreign investors turned net buyers of sovereign bonds for the second consecutive month in August, market experts doubt the sustained inflows going ahead on account of the trade worries and volatile Indian currency. However, India’s rating upgrade, along with widening spread between US and Indian bond yields, will help attract some inflows, they said.
Followed by fiscal worries from GST slab tweaks, the yield on 10-year benchmark bond rose to 6.65% level; however, when the market realised the actual impact was lower than expected, yields cooled off and came down to 6.48% levels. On Tuesday, the 10-year G-Sec yield closed flat at 6.49%. Since September, India has been a part of the FTSE Russell index. As it is a small index, market participants do not expect significant inflows.