Updated 27 February 2026 at 09:05 IST
India’s MSCI EM Weight Falls Under 14%, Ranking Slides to Fourth
India has slipped to fourth position in the MSCI Emerging Markets Index after its weight fell below 14% in the latest review. The moderation reflects relative market performance, valuation recalibrations and free-float adjustments. While the reduced weight may trigger marginal passive outflows, India’s long-term structural growth story and strong earnings outlook continue to support active investor interest.
India’s position in the MSCI Emerging Markets Index has slipped to fourth place after its weightage dropped below the 14% mark, reflecting relative underperformance and valuation-driven recalibrations in the latest index reshuffle.
According to the latest MSCI review, India’s weighting has moderated to under 14%, down from levels above 15% seen in late 2024 when the country briefly emerged as the second-largest constituent in the benchmark. The shift comes amid strong rallies in select North Asian markets and changes in free-float market capitalisation across constituents.
China continues to retain the largest share in the index despite a structurally declining long-term weight, followed by Taiwan and South Korea, pushing India to the fourth position in the emerging markets pack.
Valuations, Free-Float Adjustments Drive Shift
The MSCI EM Index allocates country weights based on free-float adjusted market capitalisation. India’s moderation reflects three core factors:
- Profit-booking in large-cap financials and IT stocks
- Slower relative earnings upgrades versus some North Asian peers
- Free-float recalibrations following stake sales and promoter adjustments
India’s equity markets had seen strong foreign portfolio investor (FPI) inflows through 2023 and early 2024, pushing valuations to a premium versus other emerging markets. At its peak, India traded at nearly a 20–25% premium to the broader EM basket on a forward price-to-earnings basis.
However, as capital rotated toward relatively cheaper Asian technology exporters and semiconductor-driven markets, India’s relative weight tapered.
The country currently accounts for roughly one-seventh of the $1.8–2 trillion in assets benchmarked globally to the MSCI EM Index, making even small weight changes significant for passive flows. A 1 percentage point shift in weight can translate into estimated passive inflows or outflows of $1.5–2 billion, depending on tracking intensity.
Passive Flow Implications and Market Impact
India’s reduced index weight could lead to marginal passive outflows from exchange-traded funds (ETFs) and index-tracking funds benchmarked to MSCI EM. However, analysts note that active allocations remain structurally positive on India due to:
- Strong nominal GDP growth
- Political stability
- Deepening domestic investor participation
- Corporate balance sheet deleveraging
Over the past five years, India’s weight in MSCI EM has more than doubled, rising from below 8% in 2019 to recent highs above 15%, underscoring the structural re-rating of Indian equities in the global allocation matrix.
Despite the latest dip, India remains one of the fastest-growing large economies in the EM universe and continues to command one of the highest earnings growth forecasts among major index constituents.
Published By : Shourya Jha
Published On: 27 February 2026 at 09:05 IST