BlackRock Inc, the world's largest fund manager, is looking to increase its stake in India's government bond market. The company aims to raise their share in the country's $500 billion pool of fully investible government bonds through exchange-traded funds (ETFs). This move comes as these bonds, which are under the Fully Accessible Route (FAR) with no foreign investment limits, are set to be included in JPMorgan's emerging market debt index starting June. The inclusion has been attracting attention from foreign money managers.
BlackRock launched its India bond ETF in February and currently manages $26 million in this fund. The ETF offers the cheapest fee among peers and has a weighted average yield of 7.14%. BlackRock's expertise in navigating complex markets like India provides them with an edge, especially in areas such as trade execution and tax minimization.
The firm is bullish on India, citing the country's high economic growth, stable currency, and relatively higher yields compared to other BBB-rated countries. With the Indian economy's positive macroeconomic backdrop and the rupee's stability, BlackRock is optimistic about its investment prospects in India.
BlackRock has launched an India bond ETF, which is designed as a convenient way for foreign investors to gain exposure to Indian government bonds. It simplifies the investment process by eliminating the need to navigate through the complexities of setting up specific accounts, managing exchange rate considerations, procuring the bonds directly, and handling tax considerations.
The India bond ETF by BlackRock is an Irish-domiciled UCITS (Undertakings for Collective Investment in Transferable Securities), which means it's regulated under European Union laws that allow for the sale of funds across EU countries. The fund is available to investors in Europe, the Middle East, Africa, and the Asia-Pacific region.
India's entry into global bond indices was discussed for nearly a decade but issues such as restrictions on foreign investors and local taxation delayed it.
In September 2023, JPMorgan had announced that it would include India in its emerging market bond index starting in June, where it will have a maximum weight of 10%. JPMorgan Chase & Co. has said it is on track to include India in its emerging market debt index from June.
In March this year, Bloomberg had announced that it will include India Fully Accessible Route (FAR) bonds in the Bloomberg Emerging Market (EM) Local Currency Government Index and related indices, to be phased in over a ten-month period, starting January 31, 2025.
The FTSE Russell is yet to include domestic bonds however.
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