New Asian Tiger? India beats China in one of MSCI's emerging market indices
MSCI EM Investable Market Index (IMI) and is on track to beat the dragon in the more popular EM (emerging markets) index as well.
Morgan Stanley announced that India has become the largest weighting in the MSCI EM IMI, overtaking China yesterday and its weight in the EM index is knocking on the threshold to be the largest.
MSCI EM IMI index captures large, mid and smallcap stocks across 24 emerging markets. With 3,355 constituents, the index covers approximately 99% of the free float-adjusted market capitalization in each country.
After a reshuffle last month in MSCI indices, analysts had estimated that Indian equities could see inflows of about %4-4.5 billion.
Given the current pace and momentum, India could potentially cross 22% weightage in MSCI EM index by year-end, according to Nuvama Alternative & Quantitative Research.
Is this good or bad news for Indian equities?
«A rising weight essentially means more absolute foreign flows. The problem for foreign portfolio flows is that the domestic market participants are outbidding them. This is why the growing issuance pipeline is important for rising foreign participation,» Morgan Stanley said.
Rising index weight can be a tell-tale sign of exuberance, the brokerage said, adding that it could also be happening due to fundamental factors such as improving free float and rising relative earnings.
While calling India top pick in an EM context and No. 2 pick in Asia-Pacific context, it said fundamental factors definitely apply to India and, to that extent, India's
