India-China weight gap shrinks to historic low
shares on Dalal Street over those in Shanghai.
Since January 2021, India's weight in the MSCI Standard Index has more than doubled from 8.9% to 18.2%, whereas China's weight has declined from 40.1% to 25.4% during the same period. This is the shortest-ever gap between the weights of stocks of the two countries. Analysts expect this gap to shrink further with the likelihood of higher flows into India as economic uncertainty in China is driving overseas fund managers out of the country.
«We expect India's growth trajectory to continue, aiming to surpass a 21-22% share in the MSCI EM index by the latter half of the year,» said Abhilash Pagaria, head — alternative & quantitative research, Nuvama Institutional Equities.
When the weight of a country's stocks goes up on a global index belonging to index providers like MSCI or FTSE, passive funds such as exchange traded funds (ETFs), which structure their portfolios based on such indices, too must raise their holdings correspondingly.
India's weight in the MSCI Standard index — second highest after China — is set to rise to 18.2% by the end of this month following the implementation of the quarterly review on February 29. In its quarterly review of indices announced on Tuesday, MSCI has included five Indian stocks, BHEL, Punjab National Bank, NMDC, Union Bank, and GMR Airports, into its portfolio and increased the weights of 12 existing stocks. This adjustment is likely to result in passive fund flows of more than $1.2 billion from overseas investors, according to
