MSCI Investable Market Index

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Context: 

India has overtaken China in the MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) Emerging Markets (EM) Investable Market Index (IMI) this week for the first time, becoming the largest country by weight. 

For MSCI in detail refer the following article:

https://www.iasgyan.in/daily-current-affairs/morgan-stanley-capital-international#:~:text=MSCI%2C%20or%20Morgan%20Stanley%20Capital,institutional%20investors%20and%20hedge%20funds.

What is MSCI?

• MSCI is an acronym for Morgan Stanley Capital International, an investment research firm that provides stock indexes and other services to investors.
• It provides stock indices, portfolio risk and performance analytics, and governance tools primarily for institutional investors and hedge funds.
• The firm manages over 160,000 indices and ensures comprehensive portfolio construction.
• It covers countries, regions, emerging markets, developed markets, small-cap, all-cap, and even Islamic finance sectors.

Types of MSCI Indexes: 

The MSCI IMI

• It is a smaller index compared to the MSCI Emerging Markets Index. Note: The MSCI Emerging Markets Index is used to measure the stock market performance within emerging countries. Established in the 1960s, It is one of many indexes created by Morgan Stanley Capital International (MSCI). The index captures mid to large-cap companies across over 12 emerging countries.
• It includes large, mid, and small-cap stocks from 24 emerging market economies.
• As of Sept first week, India held a weight of 22.27% in the MSCI IMI, surpassing China's 21.58%.
• The MSCI EM currently manages $520 billion in assets, while the MSCI IMI manages around $120 billion.

MSCI Standard Index

• It focuses on large and mid-cap companies.
• In this index, China retains the top weight at 24%, with India following at around 20%.

India’s performance in MSCI

• Last month, the MSCI India Domestic Small Cap Index added 25 new stocks to its portfolio.
• India's strong rally in the last few months has significantly boosted its representation in the MSCI indices. 
• The MSCI India Index has gained 21% this year, compared to a 0.5% decline in the MSCI China Index. 
• This outperformance has led to more Indian companies being added to the both MSCI EM and MSCI IMI indices while reducing underperforming Chinese stocks. 

Important article for reference:

https://www.iasgyan.in/daily-current-affairs/msci-index

Sources: 

https://economictimes.indiatimes.com/markets/stocks/news/india-overtakes-china-in-msci-em-investable-market-index/articleshow/113141944.cms?from=mdr

https://www.msci.com/our-solutions/indexes

PRACTICE QUESTION Q. Consider the following statements about MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) recently seen in the news: It offers critical decision support tools which aid the global investment community in constructing and monitoring portfolios.  No Domestic Small Cap Index is featured in the index. China retains the top weight in MSCI IMI ( Investable Market Index) How many of the above statements is/are correct? A. Only one B. Only two C. All three D. None Ans: A Explanation: Statement 1 is correct: MSCI is owned by Morgan Stanley, a global investment management and financial services firm.  It operates as an investment research firm providing stock indices, portfolio risk and performance analytics, and governance tools primarily for institutional investors and hedge funds.  MSCI offers critical decision support tools, including stock indices, which aid the global investment community in constructing and monitoring portfolios.  The firm manages over 160,000 indices, ensuring comprehensive and cohesive portfolio construction while mitigating benchmark misfits.  Statement 2 is incorrect: Last month, the MSCI India Domestic Small Cap Index added 25 new stocks to its portfolio. India's strong rally in the last few months has significantly boosted its representation in the MSCI indices.  Statement 3 is incorrect: India held a weight of 22.27% in the MSCI IMI, surpassing China's 21.58%.( So India, instead of china has topped the ranking) The MSCI IMI is a smaller index compared to the MSCI Emerging Markets Index. It includes large, mid, and small-cap stocks from 24 emerging market economies. The MSCI EM currently manages $520 billion in assets, while the MSCI IMI manages around $120 billion. MSCI Standard Index It focuses on large and mid-cap companies. In this index, China retains the top weight at 24%, with India following at around 20%.