NE BUSINESS BUREAU
CHENNAI, SEPT 7
India has overtaken China in MSCI EM Investable Market Index (IMI) in September 2024, Morgan Stanley has said. The weight of India in MSCI EM IMI stood at 22.27 per cent compared to 21.58 per cent of China.
Morgan Stanley reported that India has now surpassed China to become the largest weighting in the MSCI Emerging Market Investable Market Index (EM IMI). This significant shift in the market landscape took place earlier this week, with India’s weight in the Emerging Markets index edging closer to potentially becoming the largest.
- Morgan Stanley reported that India has now surpassed China to become the largest weighting in the MSCI Emerging Market Investable Market Index (EM IMI) where India’s weightage was 22.27 per cent as compared to 21.58 per cent of China
- It captures stocks across 24 Emerging Markets countries and targets coverage of approximately 85% of the free float adjusted market capitalization in each country.
- Post this rejig in MSCI EM IMI, Indian equities could witness inflows of about 4 to 4.5 billion USD, according to analysts’ estimate
MSCI IMI consists of 3,355 stocks and includes large, mid and small cap companies. It captures stocks across 24 Emerging Markets countries and targets coverage of approximately 85% of the free float adjusted market capitalization in each country.
While the main MSCI EM index (standard index) covers the large and midcap space, the IMI includes a more comprehensive range, encompassing large, mid, and small cap stocks. India’s heavier weight vis-à-vis China in MSCI IMI stems from the greater small-cap weighting in its basket.
The rebalancing reflects broader market trends. While Chinese markets have struggled on the back of economic headwinds in China, India’s markets have benefitted from favourable macroeconomic conditions. In the recent past, India has posted a much superior equity market performance, driven by strong macroeconomic fundamentals of Indian economy as well as robust performance by Indian corporates. Further, the gains in Indian equity market have been broad based, reflected across large cap as well as mid-cap and small-cap indices. Key factors contributing to this positive trend include a 47% increase in foreign direct investment (FDI) in the early part of 2024, decreasing Brent crude prices, and substantial foreign portfolio investment (FPI) in Indian debt markets.
Consequently, MSCI has been increasing relative weights of Indian stocks in its indices. This, apart from MSCI EM IMI, is also evident from the rise in weight of India coupled with the relative decline in the weight of China in MSCI EM Index. During Mar-24 to Aug-24, India’s weightage in MSCI EM went up from 18% to 20%, while the weight of China has declined from 25.1% to 24.5% over the same period.
Post this rejig in MSCI EM IMI, Indian equities could witness inflows of about 4 to 4.5 billion USD, according to analysts’ estimate. In order to maintain its pace of desired investments for economic growth and development, India needs capital from both domestic and foreign sources. In this context, increase in weight of India in global EM indices gains positive significance.
India continued to be highly favoured in emerging markets, as indicated by Morgan Stanley. The nation’s strong economic fundamentals and increasing prominence in global indices contribute to its appeal for investors with a long-term perspective. Within the Asia-Pacific region, Morgan Stanley ranks India as its second choice following Japan, underscoring the country’s significance within the investment landscape of the region.
