India Surpasses China in MSCI Emerging Markets Index
New Delhi, India – India has overtaken China in the MSCI Emerging Markets Investable Market Index (MSCI EM IMI), according to official sources citing Morgan Stanley data for September 2024. India’s weight in the MSCI EM IMI now stands at 22.27%, compared to China’s 21.58%.
The MSCI EM IMI tracks 3,355 stocks across 24 emerging markets, including large, mid, and small-cap companies, representing approximately 85% of the free float-adjusted market capitalization of these countries. India’s increased weightage is attributed to its stronger representation in the small-cap space compared to China.
Unlike the standard MSCI EM index, which covers large and mid-cap stocks, the IMI offers a more comprehensive outlook by also including small-cap companies. The rebalancing reflects broader market trends, as China’s markets have faced economic challenges, while India’s stock market has thrived under favorable macroeconomic conditions.
India’s superior equity performance is driven by strong economic fundamentals and robust corporate performance, with gains observed across large, mid, and small-cap indices. Key contributors to this trend include a 47% surge in foreign direct investment (FDI) in early 2024, falling Brent crude prices, and significant foreign portfolio investment (FPI) in India’s debt markets.
This momentum has prompted MSCI to increase India’s weightage in its indices, including the MSCI EM Index, where India’s share rose from 18% in March 2024 to 20% in August 2024. Meanwhile, China’s weight declined from 25.1% to 24.5% during the same period.
Analysts estimate that this shift in the MSCI EM IMI could result in capital inflows of USD 4 to USD 4.5 billion into Indian equities. This increased weightage in global emerging market indices is critical for India, as it seeks to attract both domestic and foreign capital to sustain its economic growth trajectory.
Doubts Revealed
MSCI Emerging Markets Index -: The MSCI Emerging Markets Index is a list of stocks from countries that are still developing their economies. It helps investors know where to put their money.
weightage -: Weightage means how much importance or value is given to something. In this case, it shows how much of the index is made up of Indian or Chinese stocks.
small-cap stocks -: Small-cap stocks are shares of smaller companies. They are usually newer or less established but can grow quickly.
foreign direct investment -: Foreign direct investment is when people or companies from other countries put money into businesses in India. This helps the Indian economy grow.
Brent crude prices -: Brent crude prices refer to the cost of a type of oil that is used worldwide. When these prices fall, it can be good for countries that import oil, like India.
foreign portfolio investment -: Foreign portfolio investment is when people or companies from other countries buy stocks or bonds in India. This brings more money into the Indian market.
capital inflows -: Capital inflows mean money coming into a country from other places. This can help businesses and the economy grow.
USD 4 to USD 4.5 billion -: USD 4 to USD 4.5 billion is a lot of money, about 32,000 to 36,000 crore rupees. This is the amount of money expected to come into Indian stocks.
Indian equities -: Indian equities are shares of companies that are based in India. When people invest in these, they are buying a part of these companies.
