India beats China in MSCI EM Market Index during September 2024, Morgan Stanley announced that the India had overtaken China in terms of its weighting in the MSCI Emerging Markets Investable Market Index (MSCI EM IMI). The weight of India in MSCI EM IMI stood at 22.27 per cent compared to 21.58 per cent of China. 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 benefited from favorable 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 overtakes China in MSCI EM IM Index During September 2024 , Morgan Stanley announced that India had overtaken China in terms of its weighting in the MSCI Emerging Markets Investable Market Index (MSCI EM IMI). India’s weight was 22.27 per cent compared to China’s 21.58 per cent . The MSCI IMI includes 3,355 stocks , covering large , mid- and small-cap companies. It covers stocks from 24 emerging market countries and represents approximately 85 percent of the ( free float adjusted) market available to investors in each country. Aims to cover capitalization. While the main MSCI EM index (standard index) includes large and mid-cap companies , the IMI is more comprehensive with large, mid and small-cap stocks. India has a higher weighting than China in the MSCI IMI , small-cap This is due to its higher loading capacity.Rebalancing reflects broader market trends. China’s markets have been struggling due to adverse economic conditions in China , while India’s markets have benefited from favorable macroeconomic conditions. In recent times , India has seen strong macroeconomic growth in the country’s economy. The equity market has outperformed on the back of strong economic fundamentals as well as the stellar performance of Indian corporates. Moreover , the gains in the Indian equity market are broad-based , with large-caps as well as mid-caps and small-caps. This is also reflected in the indices. The key factors contributing to this positive trend include – a 47 per cent increase in foreign direct investment (FDI) by early 2024, a decline in crude oil prices and substantial foreign portfolio investments in Indian debt markets. Investment (FPI).
As a result , MSCI is increasing the relative weight of Indian stocks in its indices. Apart from the MSCI EM IMI , this fact is also evident in the relative decline in the weight of China as well as the increase in the weight of India in the MSCI EM Index. March- 2024 During the period to August 2024, India’s weight in MSCI EM increased from 18 per cent to 20 per cent , while China’s weight declined from 25.1 per cent to 24.5 per cent during the same period.
According to analyst estimates , Indian equities may see inflows of about US$4-4.5 billion following this change in the MSCI EM IMI. To maintain its pace of investment required for economic growth and development , India EM indices require capital from both domestic and foreign sources. In this context, the increase in India’s weight in global EM indices has positive significance.
