India to overtake China in key index – Morgan Stanley

India is poised to surpass China as the most influential country in a key emerging markets index, according to Morgan Stanley. This increased weight could attract more foreign funds and achieve further gains in India’s stock market.

India’s weight in the MSCI emerging markets index increased to 19.8 per cent in August, nearing China’s 24.2 per cent. India’s weight has risen steadily from 9.2 per cent in December 2020, while China’s has declined from 39.1 per cent.

Analysts noted that a higher weightage attracts more foreign flows, benefiting India, which is underweight in the average emerging markets portfolio.

Foreign portfolio investors have purchased shares worth 531.78 billion rupees ($6.33 billion) in 2024, remaining net buyers since June. This trend is supported by policy continuity post-elections and upcoming global interest rate cuts.

The sustained inflows from domestic institutional investors, mutual funds, and retail traders have contributed to the record-breaking performance of the Nifty 50 index, which is up 16 per cent this year.

Morgan Stanley expects the rally to continue, driven by factors such as fiscal consolidation, increased private borrowing and spending, and higher foreign inflows.

Attribution: Reuters

Subediting: M. S. Salama