India Overtakes China In Global Stock Indices: The New Investment Powerhouse?

Recent analysis indicates that India has surpassed China in significant global stock metrics, which is poised to catalyse an increased influx of foreign investment into Indian equities.

Recent analysis indicates that India has surpassed China in significant global stock metrics, which is poised to catalyse an increased influx of foreign investment into Indian equities.

As per a Morgan Stanley report, India’s representation in the MSCI AC World IMI Index has reached a notable 2.35 per cent, in contrast to China’s 2.24 per cent, affirming India’s position as the sixth largest market globally, just trailing France. Moreover, India has now ascended to become the largest market within the MSCI Emerging Markets Investable Market Index, as highlighted by the same report.

This noteworthy achievement signals a growing international confidence in India as a potential catalyst for global economic growth, especially as China grapples with weak stimulus measures and persistent deflation. Interestingly, foreign ownership in Indian stocks, which had seen a decline earlier in the year, is now projected to achieve its most considerable quarterly increase since June 2023.

Furthermore, data reveals that the MSCI AC World IMI Index attributes the following weights to major markets: United States 63.23 per cent, Japan 5.73 per cent, United Kingdom 3.51 per cent, Canada 2.83 per cent, France 2.38 per cent, India 2.35 per cent, and China 2.24 per cent. A strategist from Bloomberg Intelligence, Marvin Chen, stated, “India’s overtaking of China in some of MSCI indices represents an ongoing rotation as investors shift to new EM growth engines.” Additionally, Morgan Stanley strategists note, “We think India will continue to gain share due to market outperformance, new issuance and liquidity improvements.”

The Indian stock market, valued at $5 trillion, has continued to reach new heights this year as global investors return, buoyed by diminishing political uncertainties stemming from recent elections. In contrast, China’s weighting in global investment benchmarks has diminished in recent years, with the CSI 300 Index languishing near five-year lows.

However, it is noteworthy that India has not yet displaced China within the more prominent MSCI World Index or the MSCI Emerging Markets Index. The IMI Index captures a broader spectrum of companies, including smaller entities, thereby making it less favoured among global investors who typically prefer indices concentrated on large and mid-cap stocks. In summary, while India appears to be on a promising trajectory with regards to foreign investment and market confidence, the challenge of further establishing itself amidst larger indices remains evident.