India is now the top emerging markets across the globe as per MSCI Emerging Markets ranking by MSCI IMI. At the end of August 2024, the MSCI published the ranking for the emerging markets, in which India displaced China, which was earlier the largest emerging market.
On 4 September, India took over China and became the highest weighted Market on the MSCI EM Investible Market Index. This index tracks the emerging markets. Earlier in 2021, in China after peaking at the MSCI EM IMI index, the weight of this emerging market slipped from the top by half a percentage point, which made room for India to become the sixth largest emerging market, right after France.
Factors Driving India’s Growth
As per global brokerage house, Morgan Stanley, the excellent performance of Indian markets, and the economy, along with new IPO launches, and increased liquidity in the market has made this possible and will continue to boost India to gain market share further. This makes the brokerage give an ‘overweight’ card to India while an ‘underweight’ card to China when it comes to the pan-Asia asset allocation.
Nominal GDP Growth
Currently, the nominal GDP growth rate of India is three times that of China, which is why the growth is evident in India diverging from China. The operating growth and earnings growth both diverged from China and boosted the Indian economy.
Dominance of Domestic Investors
Another factor that Morgan Stanley has mentioned in its report is that currently in the Indian equity market, domestic investors and market participants are outbidding their foreign counterparts. This in turn calls for an increase in equity issuance, which can get the foreign participants back in the market.
Future Ahead
While India has already surpassed China on the MSCI EM IMI index, it is now nearing the limit to exceed China by becoming the largest weighted market on the border MSCI index which is the MSCI Emerging Market index. While the former MSCI EM IMI includes 24 emerging markets’ large, mid, and small-cap counters, the MSCI Emerging Market Index has a wider base.
Source: MoneyControl
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