Indian stock market to see record inflows as India-China weight gap in MSCI Index shrinks to historic low

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Read here: MSCI Rejig: PNB, BHEL, NMDC, among five additions to India Standard Index; 27 stocks added to Small Cap index Overall, Nuvama Alternative & Quantitative Research expects India to witness upwards of $1.2 billion FII passive inflow after these adjustments, which will take place on February 29. Currently, India holds approximately 17.9% representation in the MSCI Emerging Market Index. Following the February rejig, the weight will increase to over 18.2%, marking a historic high.

Meanwhile, China’s weight in the index has declined from 40.1% in January 2021 to 25.4% now. The gap in weightage between Indian and Chinese equities on the MSCI index will be the shortest-ever and analysts expect this gap to shrink further. “Estimates suggest India could see $20-30 billion in additional inflows due to the increased weightage, based on calculations considering passive funds that track the MSCI index and their typical rebalancing practices.

Fund managers may also be attracted to India’s growth potential, further increasing inflows," said Atul Parakh - CEO of Bigul, the digital arm of Bonanza Portfolio Ltd. The change signifies India's growing importance in the global investment landscape and investor confidence in India's long-term economic growth potential, he added. Also Read: MSCI deletions reflect falling confidence in China stocks In 2023, India's stock count in the MSCI Standard index has risen to 131, with the inclusion of a net of 17 Indian stocks over the past four reviews.