India Becomes 6th Largest Market in MSCI ACWI
India has achieved a significant milestone by becoming the sixth-largest market in the MSCI All Country World Investable Market Index (ACWI IMI), surpassing China and trailing just behind France. This marks the first time India has emerged as the largest emerging market (EM) in this global index, which tracks capital market performance across the world. At the end of August, India’s weight in the MSCI ACWI IMI stood at 2.35%, 11 basis points higher than China’s 2.24%. France remains marginally ahead of India by just three basis points.
The MSCI ACWI IMI index includes large- and mid-cap stocks and is a more inclusive version of the widely tracked MSCI ACWI Index. Despite India's recent rise, China still holds a lead in this broader index, with a weight of 2.41% compared to India's 2.07% as of September 16.
While analysts suggest that India’s new position as the top emerging market in the MSCI ACWI IMI is unlikely to drive substantial passive inflows, they agree it provides a considerable image boost. Exchange-traded funds (ETFs) that track this index have relatively modest assets of under $2 billion. However, India’s top EM tag and sixth-largest weight in the MSCI ACWI IMI highlight its growing prominence on the global investment stage.
Jonathan Garner, Chief Equity Strategist for Asia and Emerging Markets at Morgan Stanley, noted, “India will continue to gain share due to market outperformance, new issuance, and liquidity improvements”. He added that India’s nominal GDP growth rate is currently in the low teens, more than three times higher than China’s. This has created a stark contrast in operating and earnings growth between the two countries.
China’s weight in the MSCI ACWI IMI has been halved since its peak in early 2021, while India’s has more than doubled during the same period. In August, India also overtook China in the MSCI Emerging Markets Investable Market Index (EM IMI) for the first time. The combined weight of domestic Indian stocks in the MSCI EM IMI now stands at 22.27%, almost 70 basis points higher than China’s 21.58%.
The MSCI EM IMI index is tracked by passive funds with assets under management of around $125 billion. In contrast, the broader MSCI EM index is followed by funds managing about $500 billion. In a pan-Asian and EM portfolio, Morgan Stanley holds the largest overweight on India and Japan at 150 basis points each, while the brokerage remains 150 basis points underweight on China.
