Market Insights

India Hits New High on Key MSCI Index as China Slides

 

India has improved its weightage on MSCI’s Global Standard index in the latest grading of emerging market stocks for investors.

Index provider MSCI raised Indian stocks to an all-time high of 18.2% on Tuesday, which saw it narrow the gap with China, and could lead to inflows of about $1.2 billion, analysts said.

In comparison, China’s weight in the index fell to 25.4% after the February revision, from 26.6% a year ago.

 

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The convergence of weights between Indian and Chinese stocks has intensified since August 2020, when China’s weightage was five times that of India’s.

MSCI’s revisions will come into effect after markets close on February 29 (as 2024 is a leap year). Indian shares had a 17.9% weight on the index ahead of the February review.

 

Sustained rally vs China’s underperformance

The gain for India can be attributed to a sustained rally in equities and relative underperformance of other emerging markets, especially China, Nuvama Alternative & Quantitative Research said in a note on Tuesday.

India could surpass a 20% weight on the MSCI index by early 2024, on consistent flows from domestic institutional investors and steady foreign portfolio investor participation, Nuvama said.

MSCI added five Indian stocks to its Global Standard index and did not move any out. In contrast, the index provider removed 66 Chinese stocks while adding five.

India’s state-owned lenders Punjab National Bank and Union Bank of India were added to the large-cap category, while Bharat Heavy Electricals and NMDC were included in the mid-cap category. GMR Airports Infrastructure was moved to the mid-cap category from small-caps.

India could witness up to $1.2 billion of passive foreign flows after the February review, Nuvama said.

About 27 small-cap stocks were added to the MSCI Domestic index, while six were either moved to other categories or removed.

Tata Motors and Macrotech Developers were added to the domestic index under the large-cap category while Punjab National Bank, Canara Bank and Embassy Office Park REIT to the mid-caps.

Bharat Heavy Electricals, Persistent Systems, MRF, Suzlon Energy and Cummins India were moved to the mid-cap index from small-caps.

 

  • Reuters with additional editing by Jim Pollard

 

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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years.

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