India Supplanted China In MSCI Emerging Markets Investible Markets Index (IMI) readjusting highest weight capture
In a momentous MSCI repositioning, India has supplanted China in the MSCI EM Investable Market Index (IMI) on 4th September. This pivotal alignment positions India as the largest weight in the index, validating its rising credentials in global financial markets.
India is also on the precipice to outweigh China in the broader MSCI Emerging Markets Index, signaling the growing allure of its domestic capital market.
The MSCI EM IMI is a multi-segmental stack of 24 economies captured across large, mid, and small-cap counters. With 3,355 constituents, the index covers approximately 99% of the free float-adjusted market capitalization in each counter.
With 3,355 constituents, the index covers approximately 99% of the free float-adjusted market capitalization in each counter.
Morgan Stanley has deliberated on the fundamental and technical dimensions of this appreciation as a mix of short to mid-term volatile exuberance to long-term stability driven by the strength of Indian capital market fundamentals. The note further highlighted the bid differential in foreign and domestic participants and the necessity for growing issuance pipelines to engage more foreign participants. Morgan Stanley, reflecting on both the exuberant and fundamental attributes in this adjustment, expressed trust in long-term credentials and potential for mild measured correction in Indian markets.
The fundamental factors definitely apply to India, and to that extent, India’s newfound position in EM is not a worry, the brokerage note said. India remains Morgan Stanley’s top preference in the EM region and its number two choice in the Asia-Pacific geography. India’s representation in the MSCI Emerging Markets Index soared to 19.8% in August 2024, up from just 9.2% in December 2020. Meanwhile, China’s share fell to 24.2% from 39.1% during the same period. This is thanks to hefty foreign portfolio investments – $6.33 billion has flowed into Indian equities this year alone. The Nifty 50 Index, a key benchmark for Indian stocks, hit new records with a 16% climb in 2024, outpacing China’s markets. Domestic institutional investors, mutual funds, and retail traders have kept a steady stream of inflows, boosting market confidence.
