India's MSCI EM index weightage to surge to 18.2%; Closing in on China's dominance

India's weightage in the MSCI EM index will rise to 18.2 percent after the latest rejig, coming much closer to China's 25.4 percent.

With the latest rejig in the MSCI's Emerging Market index, India's weightage will rise further to 18.2 percent after the rebalancing takes place on February 24. This increase in India's weightage in the index brings it at a much closer distance to China, which will hold the highest weightage of 25.4 percent following the rebalancing.

India's MSCI Emerging Markets index surged in recent years, stretching from 8 percent in June 2020 to 18.2 percent post the rebalance. With the ongoing domestic institutional investments and potential steady FII participation, India could surpass a 20 percent weight in the MSCI EM Index by 2024, Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research believes.

Pagaria attributed the more than twofold jump in India's weightage to the country's standardised foreign ownership limit (FOL) in 2020, robust performance by Indian equities, particularly in the midcap segment which resulted in numerous inclusions in every review and the relative underperformance by other EM packs, especially China.

China's weightage in the MSCI EM index has gone south from a whopping 41 percent in June 2020 to 25.4 percent after the latest rejig comes into effect.

On the other hand, in just 2023, India's stock count in the MSCI Standard index rose to 131, with the inclusion of a net of 17 Indian stocks over the past four reviews. "This marks an improvement from 2022, where only a net of 9 Indian stocks were included. The notable factors contributing to this increase in 2023 include India's substantial rally compared to other Emerging Markets and MSCI's shift from semi-annual to quarterly rebalancing for stock inclusions/exclusions," Pagaria highlighted.

Just last month, India had surpassed Taiwan to become the market with the second highest weightage in the MSCI EM index, trailing only China.

Also Read | India beats Taiwan in MSCI EM index weightage to be second after China

In the latest MSCI February 2024 quarterly review, five stocks- NMDC, GMR Airports, Union Bank, BHEL and Punjab National Bank made an entry to the MSCI Global Standard Index.

Aside from the inclusions, the weightage of a slew of stocks like Zomato, DLF, MRF, Hindalco, Interglobe Aviation, Dr Reddy's, Hero Motocorp, HDFC AMC, Lupin, Astral, One97 Communications and Bandhan Bank was increased by the index provider.

MSCI also added 27 stocks and deleted six from its Small Cap index. The additions include Healthcare Global, Hemisphere, Honasa Consumer, IIFL Securities, Indian Renewable Energy, ITD Cementation, J Kumar Infraprojects, JP Associates, Jupiter Life, Kesoram Industries, KPI Global, MSTC, Netweb Technologies, Paisalo Digital, RattanIndia Power, Sandur Manganese and SBFC Finance.

The next MSCI review is due in May and according to Nuvama Alternative & Quantitative Research, Canara Bank, NHPC and Jindal Stainless are the top three contenders for inclusion to the MSCI Standard index.

Also Read | MSCI Review: Five additions to India Standard Index, key changes in Small Cap index

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.