India is catching up on China’s spot as the largest country in a benchmark emerging-market index, underlining a quandary for global investors who are becoming increasingly exposed to its ebullient but expensive stock market. Soaring share prices, stock sales and earnings growth by Indian companies have pushed India to just under a fifth of the MSCI emerging markets index while China has fallen to a quarter, from more than 40 per cent in 2020.
Despite scepticism about the sustainability of these flows and valuations, part of the dilemma for investors is that it has been very costly in the past to miss out on Indian stocks. India has been among the best-performing markets in the world in local currency terms and kept pace with US markets in dollar terms in recent decades.