India Becomes 6th Largest Market in MSCI ACWI

India has now become the sixth largest market in the MSCI All Country World Investable Market Index (ACWI IMI), surpassing China and narrowly behind France. As of August 2024, India’s weight in the index stands at 2.35%, surpassing China’s 2.24%, with France just 3 basis points ahead of India. India is also now the largest emerging market (EM) in the MSCI ACWI IMI for the first time.

MSCI ACWI IMI Overview

The MSCI ACWI IMI includes large- and mid-cap stocks globally. While India’s weight has more than doubled since early 2021, China’s has halved during the same period. However, in the standard MSCI ACWI Index, India trails China with a weight of 2.07% compared to China’s 2.41%.

Investment Impact and Passive Inflows

Analysts suggest India’s rising weight may not have a significant impact on passive inflows as ETFs tracking the index manage under $2 billion. However, India’s top EM and sixth-largest weight status boosts its image, enhancing investment appeal.

Economic Growth and Market Performance

India’s nominal GDP growth rate is currently in the low teens, more than triple that of China, leading to a stronger earnings growth environment. In August, India also overtook China in the MSCI EM IMI with a weight of 22.27%, while China’s is at 21.58%. The MSCI EM IMI is tracked by funds managing $125 billion, while the MSCI EM index is tracked by funds with $500 billion in assets.

Morgan Stanley’s Strategy

Morgan Stanley is overweight on India and Japan by 150 basis points in their pan-Asian and EM portfolios, while maintaining a 150 bps underweight on China.