India surpasses China in world's largest investable stock index

This development highlights India's rising prominence in global equity markets and reflects a broader trend of investor confidence shifting towards the nation, driven by strong economic growth and market resilience.

The MSCI AC World IMI is one of the world’s largest stock market benchmarks, tracking nearly all globally investable stocks.

This shift in the index highlights India’s growing prominence in the global investment landscape, driven by robust economic growth, rising investor confidence, and increased market liquidity.

India’s share in the free-float "investable" version of the MSCI AC World IMI rose to 2.33 percent, surpassing China’s 2.06 percent.

This marks a major shift, as the index is largely dominated by US companies and reflects the rapid expansion of India’s stock market.

With India now holding the sixth-largest weighting in the index, the South Asian nation has become a focal point for global investors, as China's slowing economic growth and regulatory challenges have made fund managers reassess their positions in Chinese equities.

India’s stock market, particularly its blue-chip Nifty 50 index, has reached record highs in recent months, driven by the country’s strong GDP growth and a steady influx of domestic investments.

Indian companies have taken advantage of these favorable conditions, with several high-profile initial public offerings (IPOs) and capital raises, contributing to the country’s increasing influence in global markets.

Meanwhile, China’s share in global indexes has been declining. In 2020, China held 40 percent of the MSCI Emerging Markets Index, but this has since fallen to around 25 percent, while India’s share has grown from below 7 percent a decade ago to nearly 20 percent.

This shift in the MSCI AC World IMI Index is seen as a reflection of broader global trends, with investors increasingly favoring India as a growth market.

India’s economic stability, innovation, and strong corporate earnings outlook are attracting both domestic and foreign capital.

While China remains a key player in global markets, the balance of power in the MSCI index underscores India’s rising prominence in the world economy.

India’s rising share in global investment

As of September 2024, India’s share in the free-float "investable" version of the MSCI AC World IMI has climbed to 2.33 percent, surpassing China’s 2.06 percent, which makes India the sixth-largest country weighting in the index, which tracks nearly all globally investable stocks and is heavily dominated by US companies.

The index is a key barometer for global investors, guiding trillions of dollars of investment flows into various markets around the world.

India’s ascent in the MSCI AC World IMI Index is driven by its robust stock market performance, improved market liquidity, and consistent economic growth.

India’s blue-chip Nifty 50 index has hit record highs in 2023, as the country's economy registers some of the strongest GDP growth rates among major economies.

A surge of domestic investment, with more than $38 billion flowing into Indian equities this year, has further supported this rise.

Contrasting fortunes: China’s decline

While India’s stock market surges, China’s share in the global indexes has been on a steady decline.

During the Covid-19 pandemic in 2020, China held a dominant 40 percent share in the MSCI Emerging Markets Index, but this has since fallen to around 25 percent, while India’s share has steadily increased from under 7 percent a decade ago to nearly 20 percent.

China's economic slowdown, coupled with regulatory challenges and geopolitical tensions, has led many investors to scale back their exposure to Chinese equities.

Global investors are now looking at India as a more stable and promising alternative.

The Indian market's liquidity, coupled with a favorable regulatory environment and consistent corporate earnings growth, has made it an attractive destination for foreign capital.

Why the MSCI AC World IMI Index is important

The MSCI All-Country World Investable Market Index, or MSCI AC World IMI Index, is a crucial tool for global investors, as it provides exposure to companies across 23 developed and 24 emerging markets, including both large-cap and small-cap firms.

It represents nearly all publicly available equities across the globe that can be invested in by international investors.

For India to overtake China in such a benchmark index is significant.

It signals a changing tide in the global investment landscape, where India's economic reforms, digital transformation, and growing middle class are fueling market confidence.

Meanwhile, China’s economy is grappling with regulatory uncertainties, a real estate crisis, and slowing growth, which has caused a retreat in investor sentiment.

The future of India in global financial landscape

India’s elevation in the MSCI AC World IMI comes at a time when its economy is set to continue outpacing global peers.

Analysts predict continued inflows into Indian equities, buoyed by corporate earnings growth, a favorable investment climate, and government initiatives aimed at fostering innovation and infrastructure development.

This shift in global market perception of India marks a broader trend.

As Indian companies increasingly embrace digital innovation and capitalize on economic reforms, the country is positioning itself as a hub for global investors.

While challenges remain—such as high equity valuations, global macroeconomic headwinds, and geopolitical risks—India’s rise in the MSCI index suggests that it is fast becoming a key player in the world’s financial ecosystem.

In contrast, China’s declining influence in these indexes reflects the shifting dynamics of global growth, with investors now rebalancing their portfolios toward more promising markets like India.

According to global market experts, India’s overtaking of China in the world's largest investable stock index is a significant milestone that underscores its growing clout in global equity markets, as the country, with a strong economic trajectory, investor-friendly reforms, and vibrant capital markets, has emerged as a preferred investment destination.