What is Emerging Market (EM) Index?

Share Market & IPO

What is Emerging Market (EM) Index?

15 Feb 2024 Zinkpot 151

The Emerging Markets (EM) Index is a significant benchmark used to track the performance of local-currency-denominated Sovereign Bonds issued by emerging market countries.
The EM Index is designed to provide investors with a representative measure of the fixed-income market within emerging market economies. It includes government bonds issued by various emerging market countries, and its composition may change over time based on eligibility criteria.
One of the widely followed indices for emerging markets is the MSCI Emerging Markets Index. MSCI (Morgan Stanley Capital International) is a leading provider of global equity indices, and the MSCI Emerging Markets Index is designed to measure the performance of equity markets in emerging economies.
The MSCI EM-Index is designed to dynamically reflect the evolution of the emerging markets opportunity set and meet the needs of investors seeking exposure to these markets. It has been instrumental in shaping the investment landscape, with over $1.3 trillion in assets under management benchmarked to MSCI emerging markets indexes as of March 2023.
The index has been a core component of institutional portfolios, providing risk diversification and exposure to unique growth opportunities.
India is part of the MSCI Emerging Markets Index. The index covers 24 emerging market countries, and India is one of them. India's weightage in the MSCI Emerging Markets Index was raised to 16.3% from 15.9% in 2023. This increase in weightage reflects India's growing importance in the index.
With the latest rejig in the MSCI's Emerging Market index, India's weightage will rise further to 18.2 percent after the rebalancing takes place on February 24.
India's MSCI Emerging Markets index surged in recent years, stretching from 8 percent in June 2020 to 18.2 percent post the rebalance.
With the ongoing domestic institutional investments and potential steady FII participation, India could surpass a 20 percent weight in the MSCI EM Index by 2024.
Recently, an advisory committee at Bloomberg Index Services Ltd has recommended the inclusion of Indian government bonds in the Bloomberg Emerging Market Local Currency Index and a formal announcement of this is likely in the coming days.
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