As India beats China in the MSCI Emerging Markets Investable Market Index (MSCI EM IMI), Indian equities may get up to $4.5 billion, official sources said on Friday.
Earlier, Morgan Stanley said that India’s weight in the index now stands at 22.27 per cent as compared to China’s 21.58 per cent. “Key factors contributing to this positive trend include a 47 per cent 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,” a source said.
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 March to August 24, India’s weightage in MSCI EM went up to 20 per cent from 18 per cent, while the weight of China has declined to 24.5 per cent from 25.1 per cent over the same period.
According to sources, using analysts’ estimate, post this rejig in MSCI EM IMI, Indian equities could witness inflows of about 4 to 4.5 billion USD. “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,” a source said.
This index 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 per cent of the free float adjusted market capitalization in each country. Among top 10 constituents of the index include Reliance Industries, Infosys and ICICI Bank.
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.
Further sources said that 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. Also, the gains in Indian equity market have been broad based, reflected across large cap as well as mid-cap and small-cap indices.
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Published on September 6, 2024
https://www.thehindubusinessline.com/markets/india-topples-china-in-msci-emerging-markets-investable-market-index/article68614887.ece
