India overtakes China in MSCI emerging markets IMI weightage

India has overtaken China in terms of its weightage in the MSCI Emerging Markets Investable Market Index (MSCI EM IMI) say official sources citing Morgan Stanley data for September 2024.

India’s weight in the MSCI EM IMI now stands at 22.27 per cent, compared to China’s 21.58 per cent. The MSCI EM IMI, which tracks 3,355 stocks across 24 emerging markets, includes large, mid, and small-cap companies, representing approximately 85 per cent 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.

As per sources, the key contributors to this trend include a 47 per cent surge in foreign direct investment (FDI) in early 2024, falling Brent crude prices, and significant foreign portfolio investment (FPI) in India’s debt markets.

It also added that 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 per cent in March 2024 to 20 per cent in August 2024. Meanwhile, China’s weight declined from 25.1 per cent to 24.5 per cent 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.