India Closes in on China as Largest Emerging Market

• India is rapidly catching up to China in the MSCI emerging markets index, raising questions for global investors about where to allocate their capital.
• Indian stocks have surged, now making up nearly 20% of the index, while China's share has dropped significantly since 2020.
• An upcoming MSCI review could see India's weighting surpass 20%, putting it just behind China and ahead of Taiwan.
• Investors face a dilemma: invest in India's expensive but high-performing market or China's cheaper stocks amid an economic slowdown.
• Domestic investment in Indian equities has been strong, countering foreign outflows and driving up valuations, despite concerns about sustainability.

Source: FT