Updated February 13th, 2024 at 13:11 IST

India narrows gap with China in MSCI Index, reaches record weight

MSCI's latest adjustments include the addition of five Indian stocks to its Global Standard index without removing any.

Business Desk
In contrast, China's weight in the index has declined to 25.4 per cent | Image:Freepik
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India has closed the gap with China in MSCI's Global Standard index, marking a notable milestone for the Indian equity market. According to the latest revision by index provider MSCI, India's weightage in the index has surged to an all-time high of 18.2 per cent, signalling increased investor confidence and potential inflows of approximately $1.2 billion.

In contrast, China's weight in the index has declined to 25.4 per cent following the February revision, down from 26.6 per cent a year ago. The convergence of weights between Indian and Chinese stocks has been accelerating since August 2020 when China's weightage was five times higher than India's.

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The revisions by MSCI, set to take effect after market close on February 29, reflect India's sustained equity rally and the relative underperformance of other emerging markets, particularly China, as noted by Nuvama Alternative & Quantitative Research. The firm predicts that India could surpass a 20 per cent weight on the MSCI index by early 2024, driven by consistent flows from domestic institutional investors and steady foreign portfolio investor participation.

MSCI's latest adjustments include the addition of five Indian stocks to its Global Standard index without removing any. Conversely, 66 Chinese stocks were removed from the index while five were added.

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

Nuvama predicts potential passive foreign flows of up to $1.2 billion into India following the February review.

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Furthermore, the MSCI Domestic index saw the addition of 27 small-cap stocks, with six 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 joined the mid-caps.

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

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(With Reuters inputs)

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Published February 13th, 2024 at 13:11 IST