INDIA OVERTAKES CHINA IN MSCI EMERGING MARKETS INDEX: WHAT IT MEANS FOR INVESTORS

New Delhi: India has overtaken China in the MSCI Emerging Markets Investable Market Index (MSCI EM IMI), marking a significant milestone. As of September 2024, India’s weight in the index is now 22.27%, surpassing China’s 21.58%. This index, which includes a diverse range of large, mid, and small-cap stocks from 24 emerging markets, reflects the broader trends in global investing.

The MSCI IMI is a more comprehensive index compared to the standard MSCI Emerging Markets Index, as it includes smaller companies in addition to large and mid-cap stocks. India’s higher weight in this index is largely due to its significant small-cap market, which has been performing well. In contrast, China’s market has faced economic challenges, leading to its decreased weight.

Recent economic conditions in India have been favourable, driving its impressive market performance. Key factors include a 47% increase in foreign direct investment (FDI) early in 2024, lower Brent crude oil prices, and substantial foreign portfolio investment (FPI) in Indian debt markets. These positive developments have contributed to India’s growing prominence in global financial indices.

In the past few months, India’s weight in the main MSCI Emerging Markets Index has also increased from 18% to 20%, while China’s weight has decreased from 25.1% to 24.5%. This shift underscores a broader trend where Indian markets are attracting more global investors, whereas Chinese markets are struggling.

Experts estimate that this change could lead to inflows of about $4 to $4.5 billion into Indian equities. This increase in India’s weight in global indices is crucial for maintaining its economic growth and development, highlighting the importance of both domestic and foreign capital in the country’s financial landscape.

2024-09-07T10:35:54Z dg43tfdfdgfd