For the first time, India has surpassed China to become the top-weighted nation in the MSCI Emerging Market (EM) Investable Market Index (IMI). Indian equities now carry a weight of 22.27% in the index, edging out Chinese stocks, whose weighting has fallen to 21.58%.
Despite China’s market capitalisation of $8.14 trillion being over 60% larger than India’s $5.03 trillion, this shift highlights India’s growing prominence in global markets, according to Bloomberg data. The change could attract more foreign capital into Indian companies, as Morgan Stanley pointed out that India’s heavier weighting in the index will likely draw increased attention from global investors.
Over the past couple of years, MSCI has been gradually and systematically lowering its exposure to Chinese stocks as a result of their longtime underperformance, while accumulating Indian equities. That accelerated last week, when MSCI added seven Indian stocks to its standard index while axing 60 Chinese names-a cut that trimmed China’s weighting below 24 percent and lifted India’s above 20 percent for the first time.
Currently, it still has a slightly higher weighting in the MSCI EM Index, carrying a more-than-320-basis point lead over India. This has dramatically been cut, however. In 2021, China’s weight was as high as 38.7% versus a mere 9.2% for India at the time.
This rebalancing illustrates broader markets, with China struggling with economic difficulties and restrictions, while India enjoys comparative calm on the macro front. Besides, MSCI’s methodology manages investment room, and to this end, a liberalization of foreign investment rules in India has increased the investable universe for FPIs, further enhancing India’s market case.
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Source: BS
News Desk
