Indian stocks’ sharp rebound help gain second spot in MSCI EM index

A sharp rebound in Indian stocks this quarter has just seen their weighting rise to the second spot in the MSCI Emerging Markets Index, trailing only China.

With 108 members, India’s country weight stands at 14.483% as of end-August, according to data compiled by Bloomberg. That’s a whisker above 14.480% for Taiwan, which has 84 companies in the MSCI EM gauge, including the most-weighted Taiwan Semiconductor Manufacturing Co. China continued to dominate with about a third of the index weighting.

India’s S&P BSE Sensex has jumped 11% this quarter, the world’s best performance among national benchmarks in countries with a stock market value of at least $1 trillion, data compiled by Bloomberg show.

“Economic impact of China’s lockdown and the zero-Covid policy is being seen now, while India is emerging stronger, month-by-month,” Rakhi Prasad, an investment manager at Alder Capital. “India’s weight in the emerging markets can be higher, but how much it goes from here will depend on its economy’s performance.”

Driven by a pandemic-fueled retail investing boom, Indian stocks were the world’s best performers between early 2020 and October 2021. Rising concerns about aggressive rate hikes by the Federal Reserve caused foreign investors to withdraw a record $33 billion from local shares in the nine months through June.

Overseas funds have returned this quarter, pumping $7.6 billion and supercharging the market. The Sensex is now less than 5% away from a record reached in October.