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MSCI Emerging Markets Index

  • 13 Aug 2024

In August, 2024, analysts predict India's weight in the MSCI Emerging Markets Index will rise by at least one percentage point, nearly matching China’s current 22.33% share. India’s weight stands at 19.99%.

Key Points

  • Impact on Investment: A higher weighting for India is expected to attract more investment flows, potentially making the index more appealing to global investors wary of China's influence.
  • Market Rebalance: This shift could lead to a more balanced index, giving greater allocation to India’s secular growth story compared to more cyclical markets like China and Korea.
  • Investment Risks: Increased allocation may force index-following funds into India’s already-expensive stocks, amid global market turbulence.
  • India vs. China: India is emerging as a favored investment destination due to strong economic growth, a growing middle class, and a robust manufacturing sector, contrasting with China’s ongoing economic and geopolitical challenges.
  • Comparative Growth: India’s weight in the MSCI Asia Pacific Index was just 2.34 percentage points behind China’s as of July, reflecting a broader trend of India’s rising prominence.
  • Taiwan’s Competition: Taiwan, with an 18.39% share of the MSCI EM index, is also vying to replace China’s top spot, driven by global interest in its AI chipmakers, including Taiwan Semiconductor Manufacturing Co.
  • Index Additions: MSCI is expected to include additional Indian stocks, such as Dixon Technologies and Oberoi Realty, in its key India index. HDFC Bank may also see increased weighting.
  • Performance Divergence: While the NSE Nifty 50 Index has risen 12% this year, benefiting from Modi’s third term, Chinese stocks have struggled, highlighting investor preference for India amid China’s market difficulties.