In a noteworthy development, index provider MSCI has elevated India’s weightage in its Global Standard (Emerging Markets) index to an all-time high of 18.2%, according to the February review. This surge, effective after market closure on February 29, represents a substantial increase from India’s weightage in November 2020, nearly doubling within this period.
Several factors contribute to this surge, including India’s standardized foreign ownership limit (FOL) in 2020, a sustained rally in domestic equities, and relatively subdued performance in other emerging markets, particularly China, as analyzed by Nuvama Alternative & Quantitative Research.
India now holds the second-highest weightage in the MSCI Global Standard index, trailing only behind China. With consistent investment inflows from domestic institutional investors and active participation from foreign portfolio investors, Nuvama anticipates India’s weightage to potentially exceed 20% in the MSCI Global Standard index by early 2024.
In its latest review, MSCI incorporated five Indian stocks into its Global Standard index without any deletions. Notably, the index provider removed 66 Chinese stocks while adding five others.
State-owned lenders Punjab National Bank and Union Bank of India found a place in the large-cap index, while Bharat Heavy Electricals and NMDC joined the mid-cap index. GMR Airports Infrastructure was transitioned from the small-cap to the mid-cap index.
Nuvama Alternative & Quantitative Research estimates potential passive inflows of up to $1.2 billion from foreign portfolio investors into standard and small-cap indexes following the February review.