Let’s dive into two key events that, despite being separate, are leading to the same big effect – MSCI Index Rejig and Zomato’s inclusion in BSE Sensex.

The News

The Morgan Stanley Capital International (MSCI) Emerging Market Index, which tracks the performance of companies in emerging countries like India, China, Taiwan, South Korea, etc., announced the index rebalancing, which came into effect on November 25.

It would mean ₹26,000 crore inflows into Indian equity markets. On the other hand, Zomato is also set to be part of the BSE Sensex index, which is more or less similar to the above news.

Let’s start with how the index works.

Decoding: The Index Rejig

The main purpose of an index is to track and understand the performance of a specific part of the financial markets.

For example, the BSE Sensex represents the top 30 companies in India. It gives a snapshot of how the Indian stock market is doing overall. Think of an index as a mirror of the market or a particular segment of it.

Tracking every single stock in the market daily isn’t practical.
Solution? You can simply look at the Sensex or any broad market index to get an idea of how the market performed at any point in time.

Now, for an index to stay accurate as a market representative, it must reflect the top companies based on their market value. Since these leading companies can change over time, the index is regularly updated to maintain its reliability.

The MSCI Indices Rejig

Just like the BSE Sensex, the MSCI Emerging Market index was also rebalanced. It became effective on 25 November 2024, affecting Indian equities.

The MSCI rebalancing resulted in the inclusion of several Indian companies in the MSCI’s Global Standard/EM Index.

India’s stock count in the MSCI Standard/EM Index increased to 156, with five additions and no exclusions.

While China continues to dominate the MSCI EM Index with a weight of 27% and 598 stock count, India’s weight in the MSCI EM Index increased from 19.3% to 19.8%.

To Conclude

The inclusion of Indian equities in the MSCI Emerging Market Index emphasizes the growing recognition of India’s market strength on the global stage.

With an increased weight in the index and ₹26,000 crore in projected inflows, it signals confidence in the resilience and potential of Indian companies.