India topples China to lead MSCI Emerging Markets index
India has outperformed China to become the world's largest MSCI Emerging Markets (EM) market, according to the latest data from the MSCI EM Investable Market Index (IMI). This significant shift occurred earlier this month, marking a new milestone in India's economic growth. The change was facilitated by a slight decrease in China's weight in the index since its peak in early 2021.
India's market position and global ranking
As of August end, India now holds the top position across EM markets as per MSCI IMI. This shift has also propelled India to become the sixth largest market worldwide, trailing closely behind France. The MSCI EM Investable Market Index (IMI) is a comprehensive measure that includes large, mid, and small-cap counters from 24 emerging economies.
Morgan Stanley's outlook on India's market performance
Global financial services firm, Morgan Stanley, predicts that India will continue to expand its market share due to its superior market performance, new issuances, and liquidity enhancements. The firm maintains an 'overweight' stance on India while reiterating its 'underweight' call on China in the pan-Asia EM asset allocation play. This outlook reflects confidence in India's economic potential and resilience amid global market fluctuations.
India's GDP growth outpaces China
India's nominal GDP growth rate, which measures the increase in the dollar value of total production over time, is currently in the low teens, which is triple that of China. This disparity has led to a significant divergence in operating and earnings growth between companies in these two countries. Morgan Stanley notes that foreign investors are being outbid for the same equity by domestic market participants, highlighting the need for an expanding issuance pipeline to attract more foreign participants.
