India Becomes Largest Weight in MSCI EM IMI, Overtakes China
- September 9, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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India Becomes Largest Weight in MSCI EM IMI, Overtakes China
Sub :Eco
Sec: Financial market
- India Overtakes China:
- India overtook China in the MSCI Emerging Markets Investable Market Index (IMI) on September 4, 2024, becoming the largest weight.
- India is also close to surpassing China as the top weight in the broader MSCI Emerging Markets index.
- MSCI EM IMI Overview:
- The MSCI Emerging Markets IMI includes large, mid, and small-cap stocks from 24 emerging markets economies.
- Morgan Stanley’s Perspective:
- Morgan Stanley explores whether India’s rising index weight is a sign of market exuberance or driven by fundamental factors.
- The rising free-float and increasing relative earnings of Indian companies are viewed as fundamental drivers.
- India remains Morgan Stanley’s top preference in the Emerging Markets (EM) context and is ranked as their second choice in the Asia-Pacific region.
- Foreign Investors Outpaced by Domestic Participants:
- Currently, domestic investors are outbidding foreign investors for Indian equities.
- The growing issuance pipeline is considered crucial to encourage more foreign investment participation.
- Market Correction Possibilities:
- Morgan Stanley points to several potential market correction triggers, but doesn’t expect these to halt the ongoing bull run.
- The bull market is seen as only halfway through, with India’s weight in the index expected to continue rising.
- Future Outlook:
- The bull market peak may still be ahead, with India’s index weight having further potential to increase before reaching its peak.
MSCI Emerging Markets Investable Market Index
The MSCI Emerging Markets Investable Market Index (IMI) is a comprehensive index designed to measure the performance of stocks from emerging market countries. It includes large, mid, and small-cap companies, covering around 99% of the free float-adjusted market capitalization in each country.
- Broad Market Coverage: The MSCI Emerging Markets IMI includes large, mid, and small-cap segments, offering a full representation of the investable equity market.
- Countries Included: This index covers 26 emerging market countries, which are generally characterized by lower levels of economic development compared to developed markets. Examples include countries like Brazil, India, China, South Africa, and Russia.
- Number of Constituents: The index consists of over 3,000 companies across various industries, providing a diversified exposure to emerging markets.
- Free Float-Adjusted: Like most MSCI indices, the free float-adjusted market capitalization methodology is used, which means it only considers shares available to international investors, excluding shares held by insiders or governments.
- Sector Diversification: The index covers a wide range of sectors, such as information technology, financials, consumer discretionary, and energy.
- Investment Use: It is widely used by investors, fund managers, and institutions as a benchmark to track the performance of emerging markets. It’s often referenced by ETFs (Exchange-Traded Funds) and other investment products that focus on emerging markets.
- Growth Opportunities: Emerging markets are seen as regions with significant growth potential due to favorable demographics, increasing consumption, and improving infrastructure. However, they may also have higher volatility and political risk compared to developed markets.
- Performance & Volatility: The index provides exposure to high-growth opportunities, but investors need to be aware of the inherent risks such as currency risk, political instability, and market liquidity.