For the first time in twenty-six years, no Indian company is left in the MSCI Emerging Markets Top 10 Index. This index is used by global mutual funds and Exchange-Traded Funds (ETFs) as a benchmark for deciding which emerging market companies to invest in, and the recent AI boom has forced Indian companies out of it.
India’s primary heavyweights- HDFC Bank and Reliance Industries have moved from 7th and 8th positions in March to 11th and 12th positions in recent months, with their individual weightages slipping below 0.8% of the index. Overall, India’s weightage in the index has dropped to 10.87%, a six year low as Chinese, Taiwanese and South Korean companies have taken over.
Why the benchmark matters
The MSCI Emerging Markets Index is a master scorecard that fund managers use to decide which developing countries to invest in. The index is updated on a quarterly basis, taking into account market capitalization, market accessibility, and corporate events.
Now that Indian companies have witnessed a drop in the index, global fund managers, many of whom manage over $700 billion in assets, will now have to rebalance their portfolios or take on significant risk as a result of the investments.
Indian companies on the list
As part of the broader MSCI Emerging Market Index, there are currently 165 Indian companies on the index. ICICI Bank, Bharti Airtel, Infosys, Mahindra and Mahindra, Larsen and Toubro and Bajaj Finance remain the other prominent Indian companies on the list.
Broader concerns with Indian equities
India’s benchmark Sensex and Nifty haven’t been performing well lately, with the Sensex declining 12.86% and the Nifty down by 10.97%. FIIs have been actively selling their Indian equities for quite some time now, many of them through the IPO route, as they cashed in on Indian domestic investors’ renowned faith in the domestic markets. Though Indian companies could regain their positions in subsequent revisions of the index, this indicator shows how the AI-led investment boom has left behind Indian companies, most of which aren’t a part of the AI-led ecosystem.
