India has recently surpassed China in the Morgan Stanley Capital International (MSCI) Emerging Markets Investable Market Index (EM IMI). India now holds a weightage of 22.27%, compared to China’s 21.58%. This shift underscores India’s stronger market performance and favorable economic conditions compared to China’s recent economic challenges.
Index Rebalancing and Market Trends
In September 2024, the MSCI EM IMI index underwent rebalancing, leading to India’s increased weight. This index includes large, mid, and small-cap stocks, and India’s larger small-cap component contributed to its higher weight. This change reflects broader market trends and the current strength of India’s equity market.
Strong Market Performance
India’s equity market has shown impressive performance, supported by solid macroeconomic fundamentals and strong corporate earnings. Key drivers include a 47% increase in foreign direct investment, falling Brent crude oil prices, and substantial foreign portfolio investment in Indian debt markets. These factors have contributed to India’s elevated position in the index.
Potential Investment Inflows
The adjustment in the index is expected to result in significant investment inflows into Indian equities, estimated between $4-4.5 billion. India’s weight in global indices has also risen, with its share in the MSCI Emerging Markets Index increasing from 18% to 20% between March and August 2024. Conversely, China’s weight has decreased from 25.1% to 24.5%.
Regional and Global Impact
India’s rising share in global indices and its growing GDP contribution highlight its increasing significance to global investors. Morgan Stanley ranks India as a leading investment choice in the Asia-Pacific region, just behind Japan. However, analysts note that market corrections could occur due to changing investor sentiments and market dynamics.
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India’s stronger market performance and favorable economic conditions have led to its higher weight in the MSCI Emerging Markets Index.
The MSCI EM IMI includes large, mid, and small-cap stocks.
Key factors include increased foreign direct investment, lower Brent crude prices, and significant foreign portfolio investment in Indian debt markets.
The adjustment is expected to attract approximately $4-4.5 billion in investment into Indian equities.
India’s growing weight in global indices and its high GDP contribution make it a significant investment choice, ranking just behind Japan in the Asia-Pacific region.
