The MSCI Global Standard (emerging markets) Index – alternatively known as the GSI, is a prominent stock index created by Morgan Stanley Capital International (MSCI). It was launched in 1988. Other notable indices in this category include the S&P emerging market index, the Dow Jones emerging markets index & the Morningstar emerging market index.
The MSCI GS (EM) index represents large and mid-cap equity performance across 24 emerging markets (EM) countries. It currently has around 1440 constituents. 131 Indian companies are a part of this index. It covers approximately 85% of the Indian equity market. Top 10 companies in the index include 3 Indian companies now: Reliance industries, Infosys and ICICI bank.
The EM countries include Brazil, Chile, China, India, Colombia, Czech Republic, Egypt, Greece, Hungary, Indonesia, South Africa, UAE, South Korea, Qatar, Poland, Taiwan, Thailand, Turkey, Saudi Arabia, Malaysia, Mexico, Peru, Philippines & Kuwait.
India’s giant leap
In April 2023, India’s share in the index was 13.7% and India was at the third place after China & Taiwan. Fast forward to today, we have an all-time high weightage of 18.2% in the index. (China’s weightage is down to 25.4% from it’s all-time high of over 40%)
As per Nuvama alternative & quantitative research, India’s equity rally coupled with underperformance in other key markets led to this boost. The Indian government had relaxed norms for the foreign ownership limits in the Indian equity markets from April 1, 2020. This change allowed MSCI to revise foreign ownership limits upwards – meaning increased weightage for India in the Index.
Numvama now expects Indian weightage to cross 20% in early 2024.
BHEL, GMR Airports Infra, NMDC, Punjab National Bank, Union Bank of India (total 5 companies) were added to the index in the latest February review. None was deleted.
On the other hand, 5 Chinese companies were also added but 66 Chinese companies were removed from this index.
Also Read: World’s Best Airports List 2024: Where do Indian airports – Delhi, Mumbai, Bengaluru – stand?
The impact
Since such indices are used by international index funds and ETFs to invest in the emerging markets like India, the weightage increase means a lot in terms of foreign inflows into India. We could see inflows to the tune of $1.2 billion owing to these passive fund investments going forward.
Of the existing stocks in the index, Zomato is expected to receive the highest investments due to the weight increase. The adjustments mentioned in the February review will take effect after 29th Feb.
It is going to be an interesting year for foreign flows as far as India is concerned. Indian equity is gaining momentum with such positive news and on the other side, India’s G-secs will also get included in the JP Morgan’s widely tracked Government Bond Index-Emerging Markets (GBI-EM) starting June 28, 2024.
Exciting times ahead indeed!
Note: The above content is for informational & educational purposes only. Not advice. Please consult your financial advisor before investing.
