Indian equities grow stronger among emerging markets

India’s exposure to the global emerging markets (GEM) and Asia-excluding Japan (AxJ) funds has increased over the last three months when GEMs lost more than $4 trillion of market capitalisation. The global markets lost this significant amount due to China’s move to devalue its currencies which increased the threat of a global growth 'reset'. GEM and AxJ funds have witnessed nearly 1.2 per cent and 0.5 per cent change in their allocation to Indian equities during the last one month while their portfolio weightage to India stands at 12.6 per cent and 14.1 per cent, respectively. These two funds account for nearly 22 per cent of the FII funds invested in India and they have a cumulative asset size of over $400 billion. There are three reasons why the weightage for India increased in GEM and AxJ funds despite FIIs having sold Indian equities worth $4.2 billion during June-September. First, the pace of FII outflows in Indian equities was slower than rest of the EMs. Second, Indian equities are also outperforming other EMs. Last, lower currency depreciation as compared with the average EM basket entailed a higher weightage.