BSE: India to soon overtake China to become most influential player in key emerging market index
Bangalore:
India is set to soon overtake China as the most powerful player in a key emerging markets index, attracting more foreign funds and fueling a stock market rally that, while among the world's best, is “only past the halfway point,” according to Morgan Stanley.
India's weighting in the MSCI Emerging Markets Index rose to 19.8% after a rebalancing in August, moving closer to China's 24.2%. India's weighting has risen steadily from 9.2% in December 2020, while China's has fallen from 39.1%.
“The increase in weight essentially means an increase in absolute foreign flows,” analysts led by Ridham Desai said in a note on Wednesday.
“In the context of India being underweight in the average emerging market portfolio, this is even better for foreign portfolio flows.”
Foreign portfolio investors (FPIs) have bought shares worth Rs 531.78 billion ($6.33 billion) in 2024 and have remained net buyers since June, helped by post-election policy continuity in the country and the imminent start of interest rate cuts globally.
So far, steady inflows from domestic institutional investors, mutual funds and retail traders have helped lift the benchmark Nifty 50 to record highs. Its 16% jump this year is bigger than most other markets, including China.
Mr Desai expects the rally to continue as fiscal consolidation allows private borrowing and spending to fuel the next leg of income growth, and higher foreign investment inflows will support excess liquidity, ensuring lending remains resilient.
“We believe we are only halfway through the current bull market. The peak of the bull market for India may still be ahead and the emerging market index weighting may have some distance to go before it peaks.”
Morgan Stanley retained India as its top pick among emerging markets and second-top pick after Japan in the Indo-Pacific.
Among stocks, he favors cyclicals over defensives and large-caps over small-caps. And among sectors, he is overweight in financials, technology, consumer discretionary and industrials and underweight in others. ($1 = INR 83,9690)
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated source.)