MSCI, a prominent index provider, has recently announced a significant increase in India’s weightage within its Global Standard (Emerging Markets) index. This adjustment marks a historic high of 18.2%, taking effect after the market closes on February 29th. Notably, India’s weightage in this index has nearly doubled since November 2020, a trend attributed to several factors. These include India’s implementation of standardized foreign ownership limits (FOL) in 2020, a sustained upswing in domestic equities, and the relative underperformance of other emerging markets, notably China, as highlighted by Nuvama Alternative & Quantitative Research.
India now holds the second-highest weightage in the MSCI Global Standard index, trailing only behind China. With a consistent influx of funds from domestic institutional investors and steady participation from foreign portfolio investors, there is speculation that India’s weightage could potentially surpass 20% in the MSCI Global Standard index by early 2024, according to insights provided by Nuvama.
In its latest review, MSCI made notable changes to its index composition. Five Indian stocks were added to the Global Standard index without any deletions, while 66 Chinese stocks were removed. Among the Indian additions, state-owned lenders Punjab National Bank and Union Bank of India were included in the large-cap index, with Bharat Heavy Electricals and NMDC making their way into the mid-cap index. Additionally, GMR Airports Infrastructure was shifted from the small-cap to the mid-cap index.
Looking ahead, Nuvama Alternative & Quantitative Research projects potential passive inflows of up to $1.2 billion from Foreign Portfolio Investors (FPIs) into the standard and small-cap indexes following the February review.
