Major European ETF issuer Amundi has expanded its offering with the launch of a new fund providing direct, targeted exposure to local currency Indian government bonds.
Indian government bonds have seen increased demand following their inclusion in global bond indices.
The Amundi JP Morgan INR India Government Bond UCITS ETF has been listed on Deutsche Börse Xetra and is available in euros (INGE GY) and US dollars (INGU GY).
The fund is designed to offer investors a cost-effective route into India’s bond market, an asset class that is becoming increasingly attractive due to India’s robust economic growth and its rising inclusion in global bond indices.
Methodology and index details
The ETF tracks the JP Morgan India Government Fully Accessible Route (FAR) Bonds Index, which consists of fixed-rate and zero-coupon rupee-denominated bonds issued by the Indian central government.
The index only includes bonds that are accessible to non-resident investors through the Fully Accessible Route (FAR), a channel created by the Reserve Bank of India, in collaboration with the Indian government, to allow foreign investment in specified government securities without restrictions.
To qualify for inclusion in the index, bonds must have a minimum remaining maturity of at least six months and an issue size of over $1 billion equivalent.
The index currently reflects an effective duration of 6.38 years, with a yield-to-worst of 6.77%. India’s sovereign bonds are rated BBB- with a positive outlook.
Rising demand for Indian bonds
The inclusion of Indian government bonds in key global indices, such as the JP Morgan GBI-EM Global Series, has driven increased demand and liquidity for these securities, making Indian bonds a more significant asset class in global portfolios.
With India projected to be the fastest-growing economy among G20 nations in 2024, according to Moody’s, the country’s fixed income market is becoming an increasingly compelling opportunity for investors seeking exposure to emerging market yields.
The Amundi JP Morgan INR India Government Bond UCITS ETF offers investors the chance to capture these potentially attractive yields while gaining exposure to one of the world’s most dynamic and fast-growing economies.
Europe’s growing roster of Indian government bond ETFs
Amundi’s new launch marks the sixth Indian government bond ETF to be made available in Europe. Other prominent providers in this space include BlackRock, Tabula, DWS, UTI, and LGIM, all offering various products that provide exposure to India’s local currency government debt market.
Among these, Amundi’s ETF stands out for its competitive pricing, matching the UTI India Sovereign Bond UCITS ETF (UIGB NA) with an expense ratio of 0.30%, the lowest among its peers.
However, the largest Indian bond ETF remains the L&G India INR Government Bond UCITS ETF (TIGR LN), with $900 million in assets under management and a higher expense ratio of 0.39%. Launched as the first ETF in this market, it has established itself as a leader in terms of scale.
Enhanced diversification potential
Amundi positions this ETF as a crucial building block for investors seeking to diversify their emerging markets fixed income allocation, noting that its addition could enhance yield potential and provide valuable exposure to a rapidly growing economy.
Benoit Sorel, Head of Amundi ETF, Indexing & Smart Beta, commented on the fund’s significance: “India’s economic momentum and the recent inclusion of its government bonds in key global indices present a unique opportunity for international investors. By launching this ETF, we are pleased to provide our clients with a highly accessible and diversified tool at competitive pricing.”