Prelims: Current events of national and international importance | Economy
Why in News?
India’s weight in the (MSCI) Emerging Markets (EM) Index has dropped sharply from a peak of approximately 21% in September 2024 to just about 12% by May 2026.
- MSCI Emerging Markets Index – It is a premier financial benchmark set by Morgan Stanley Capital International that tracks the equity performance of large and mid-cap companies across 24 developing nations or Emerging Markets (EM) countries.
- With 1,204 constituents, it covers approximately 85% of the free-float market capitalization in each included country, offering a widely used gauge for global investors.
- Geographic Composition – It is highly concentrated in Asian emerging economies, with the top country allocations
- China
- Taiwan
- India
- South Korea
- Top Sector Weights – While sector allocations fluctuate, the index is predominantly driven by
- Information Technology
- Financials
- Consumer Discretionary
- How to Invest in the Index – Individual investors cannot purchase shares of the MSCI Emerging Markets Index directly.
- Instead, exposure is obtained through index-linked investment products
- Exchange-Traded Funds (ETFs)
- Index Mutual Funds
India’s Status
- Peak & Fall – India’s weight has been on a downward trend since peaking around 21% in September 2024 and now stands at 11.94% (May 2026).
- Rank Shift – India shifts from 2nd largest constituent to 4th place, behind Taiwan (24.84%), China (23.05%), and South Korea (18.69%).
- In fact, only a few days ago, Taiwan overtook India and became the fifth most valuable stock market in the world in terms of market capitalisation.
- Reasons Behind the Decline –
- India’s equities are dominated by BFSI, IT services, consumer staples, whereas has limited exposure to AI hardware, semiconductors, platform-driven tech.
- FPIs accounted for approximately 69% of turnover during MSCI’s May 2026 rebalancing; sustained outflows due to elevated valuations, slower earnings growth, rupee weakness.
- The Indian companies with the highest weight are HDFC Bank and Reliance Industries, both at 0.79%.
Reference
Indian Express | Why India is losing weight in the MSCI Emerging Markets Index
