India's influence in the MSCI Emerging Markets Index has surged to 19.9%, nearing China's 24.42% which declined from 40% in 2020. India's rise from single-digit representation showcases its economic strength. The top 5 MSCI nations hold 80% weight, with China leading. India's growth stems from a robust economy, notably in IT and telecom, supported by a youthful workforce. Post-COVID resilience and regulatory changes, like SEBI's foreign ownership relaxation, bolster India's standing. IPO momentum further enhances market liquidity, projecting an increased MSCI weightage, highlighting India's global investment appeal.
India's growing prominence in the MSCI Emerging Markets Index is a testament to its economic prowess, with a weightage now standing at an impressive 19.9 per cent, closely trailing China's 24.42 per cent which has seen a decline from its peak of nearly 40 per cent in 2020.
This surge marks a remarkable improvement for India, which not too long ago held only a single-digit representation in the EM Index. The index itself encompasses a diverse array of large and mid-cap companies from 24 Emerging Markets (EM) nations, totaling 1,328 constituents and covering around 85 per cent of free float-adjusted market capitalization in each of these countries.
As of August 2024, the MSCI EM Index spotlight shines brightest on the top 5 countries, which jointly command almost 80 per cent of the index's weightage. China leads the pack at 24.42 per cent, closely trailed by India at 19.9 per cent, Taiwan at 18.77 per cent, Korea at 11.67 per cent, and Brazil at 4.50 per cent. The remaining 19 nations collectively hold a weightage of 20.73 per cent.
The reasons behind China's diminishing weightage are linked to its companies struggling to meet the stringent market capitalization and free float requirements stipulated by the MSCI methodology. In contrast, India's rise in the index can be attributed to its robust economic growth trajectory in recent years.
India's economic success story is underscored by its status as one of the world's fastest-growing economies, boasting growth rates averaging between 7-8 per cent. Integral to this growth is India's vibrant services sector, particularly in IT and telecommunications, serving as a key driver of the nation's economic expansion. Moreover, India's youthful demographic, with two-thirds of its workforce being young, offers a dynamic and cost-effective labor pool, further fueling its economic momentum.
Post-COVID, India's markets have demonstrated remarkable resilience, outperforming other EM countries and delivering superior returns. The Nifty 50 Benchmark Index, for instance, has posted a commendable return of 17.35 per cent this year up to September, showcasing the market's strength and stability.
Beyond economic factors, India's increased weightage in the MSCI EM Index can also be credited to regulatory changes, such as SEBI's relaxation of foreign ownership limits in Indian companies, and a surge in IPO activity within the Indian market.
In 2023, a total of 243 companies debuted on Indian exchanges through IPOs, and the momentum has continued into 2024, with many more companies gearing up for public listings. Notable among these are the anticipated IPOs of major players like Hyundai Motor India, Swiggy, Zomato, and NTPC Green, collectively injecting significant liquidity and trading volume into the market.
These developments are poised to further elevate India's weightage in the MSCI EM Index, underlining the nation's growing influence and attractiveness as an investment destination on the global stage.
Comments