In the realm of emerging market stocks, a significant recalibration is underway as India steadily narrows the gap with China in MSCI’s Global Standard index. With the latest revision, India’s weightage in the index has surged to an all-time high of 18.2%, marking a remarkable milestone for the country’s equity market.
This uptick in India’s representation comes at the expense of China, whose weight in the index has dipped to 25.4%, down from 26.6% a year ago. The convergence of weights between the two Asian giants has been a notable trend since August 2020 when China’s weightage overshadowed India’s by a significant margin.
The revision, set to take effect on Feb. 29, is poised to attract approximately $1.2 billion in inflows, according to analysts. This surge in India’s weightage is attributed to a sustained rally in equities and the relative underperformance of other emerging markets, particularly China.
Looking ahead, projections suggest that India’s weight on the MSCI index could surpass 20% by early 2024. This trajectory is underpinned by consistent flows from domestic institutional investors and steady participation from foreign portfolio investors, indicating growing confidence in India’s economic prospects.
MSCI’s latest reshuffling saw the addition of five Indian stocks to its Global Standard index, further bolstering India’s representation. Notably, no Indian stocks were removed, in stark contrast to the 66 Chinese stocks that were delisted.
Within India’s equity landscape, the inclusion of state-owned lenders like Punjab National Bank and Union Bank of India in the large-cap category, alongside companies like Bharat Heavy Electricals and NMDC in the mid-cap segment, underscores the breadth of India’s market depth.
Moreover, the reshuffling extended to the domestic index, with Tata Motors and Macrotech Developers joining under the large-cap category, while Punjab National Bank, Canara Bank, and Embassy Office Park REIT were added to the mid-cap segment.
In essence, India’s ascent in MSCI’s Global Standard index signifies a broader shift in the dynamics of emerging markets, with India emerging as a formidable player on the global investment stage. As India continues to showcase resilience and growth potential, investors are increasingly turning their gaze towards the opportunities presented by the Indian equity market
