BENGALURU, Sept 5 Reuters India could soon overtake China as the most influential in a key emerging markets index, pulling in more foreign funds and adding fuel to a stock market rally that, though already among the best globally, is only past the halfway mark, Morgan Stanley said.

The South Asian country39;s weightage in the MSCI emerging markets index rose to 19.8 after a rejig in August, closing in on China39;s 24.2. India39;s weightage has steadily increased from 9.2 in December 2020, while China39;s has dropped from 39.1.

A rising weight essentially means more absolute foreign flows, analysts led by Ridham Desai said in a note on Wednesday.

In the context of India being underweight in the average emerging markets portfolio, this is even better for foreign portfolio flows.

Foreign portfolio investors FPIs have bought shares worth 531.78 billion rupees 6.33 billion so far in 2024, and have remained net buyers since June, bolstered by policy continuity after the country39;s elections and an imminent start to global interest rate cuts.

So far, the sustained inflows from domestic institutional investors, mutual funds and retail traders have helped power the benchmark Nifty 50 to record highs. Its 16 jump this year is more than most other markets, including China.

Desai expects the rally to continue as fiscal consolidation allows private borrowing and spending to fuel the next leg of earnings growth and as higher FII inflows will keep liquidity in surplus, lending…