India has become the sixth-largest market in the MSCI All Country World Investable Market Index (ACWI IMI), surpassing China and narrowly behind France. For the first time, India is now the largest emerging market (EM) in the gauge that tracks the performance of global capital markets. At the end of August, India’s weightage in the MSCI ACWI IMI stood at 2.35 per cent, 11 basis points more than China, which is at 2.24 per cent. France has just 3 basis points more weightage than India.
The MSCI ACWI IMI index encompasses stocks in the large- and mid-cap space. It is a spinoff of the more widely followed MSCI ACWI Index, which has only large- and mid-cap representation. India still lags behind China in this index, with a weightage of 2.07 per cent compared to 2.41 per cent for neighbouring China as of September 16.
According to analysts, India’s top weighting in the MSCI ACWI IMI index may not significantly impact passive inflows, as the index is tracked by exchange-traded funds (ETFs) with relatively modest assets of less than $2 billion. However, getting the top EM and sixth-largest weightage tag in the index is expected to provide a substantial image boost, enhancing the country’s investment attractiveness and reputation.
In a note, Jonathan Garner, chief equity strategist for Asia and EM at Morgan Stanley, said, “India will continue to gain share due to market outperformance, new issuance, and liquidity improvements.”
China’s weight has fallen by half since peaking in early 2021, while India’s has more than doubled during this period.
“India’s nominal GDP growth rate is running in the low teens currently, which is more than 3x that of China. This is generating a profoundly divergent operating and earnings growth environment for companies between the two geographies,” he added.
In August, India also overtook China to become the top weight in the MSCI EM IMI for the first time. The combined weightage of domestic stocks in the MSCI EM IMI index is 22.27 per cent, while that of India’s larger neighbour is almost 70 basis points lower at 21.58 per cent.
This is despite China’s total market cap of $8.14 trillion being over 60 per cent greater than India’s $5.03 trillion, according to Bloomberg data.
The MSCI EM IMI index is tracked by passive funds with assets under management of about $125 billion. The main MSCI EM index, however, is tracked by funds with assets of $500 billion.
In the pan-Asia and EM portfolios, Morgan Stanley has the largest overweight on India and Japan at 150 basis points each. At the same time, the brokerage is 150 basis points underweight on China.
First Published: Sep 18 2024 | 6:03 PM IST
