Mumbai, September 6: Strong fundamentals have helped India pip China in the MSCI EM Investable Market Index (IMI) to become the largest weight. The world’s fastest-growing economy is also set to surpass China as the top weight in the broader MSCI Emerging Markets index too.

The MSCI Emerging Markets IMI captures large, mid and small cap representation across 24 Emerging Markets (EM) countries. With 3,355 constituents, the index covers approximately 99 per cent of the free float-adjusted market capitalisation in each country. Global brokerage Morgan Stanley said in a note that the rising index weight could be a sign of exuberance or “due to fundamental factors such as improving free-float and rising relative earnings of India Inc.” Indian EV Market To See Large-Scale Invasion of Chinese Companies Due to Renewed Policy To Make India 'Hub of Electric Vehicle Manufacturing', Says Report.

"Fundamental factors definitely apply to India and, to that extent, India's new found position in EM is not a worry," the brokerage said, adding that India remains its top preference in the EM region, and its second choice in the Asia-Pacific. According to the note, there are several potential triggers for a market correction but are not significant enough to apply the brakes on the bull run in Indian equities. India's weight in the EM index could have some more distance to travel before it peaks. India Emerges As Promising Alternative to China for Chipmaking Equipment Industry Amid Tensions Between Beijing and West.

Market analysts said that the Indian economy continues to do well and the macros are improving as indicated by the 47 per cent growth in foreign direct investment (FDI) in the April-June period in FY25, and the steady decline in Brent crude prices to below $73 now. There is financial stability and the growth momentum in the economy continues to be strong. 

Foreign Portfolio Investors (FPI) have pumped over Rs 1 lakh crore into the Indian debt market in 2024 so far due to the country’s inclusion in JP Morgan’s Emerging Market (EM) Government Bond Indices in June this year. There are many other reasons for the sharp rise in the foreign inflow in the Indian debt market like a high growth rate, stable government, reduction in inflation and financial discipline by the government.

(The above story first appeared on LatestLY on Sep 06, 2024 10:50 AM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).