MSCI Emerging Markets Index

The MSCI Emerging Markets Index (commonly abbreviated as MSCI EM) is a free-float adjusted market capitalisation-weighted equity index maintained by MSCI Inc. (previously Morgan Stanley Capital International), covering large- and mid-cap stocks across 24 emerging market (EM) countries. First launched in 1988, the MSCI EM is the most widely referenced benchmark for the emerging markets equity asset class globally, with over USD 1.7 trillion in assets benchmarked to it as of 2024. For Indian mutual fund investors, the MSCI EM Index is the benchmark used by fund-of-fund (FoF) schemes and overseas ETF feeder funds that invest in emerging markets equities.

Publisher

MSCI Inc. is an American financial services company headquartered in New York, providing indices, analytics, and data to institutional investors. MSCI was spun off from Morgan Stanley in 2009 and listed on the New York Stock Exchange. It maintains over 240,000 indices globally. MSCI’s classification of markets into developed, emerging, and frontier categories – updated annually through the MSCI Market Classification Review – is the most influential market taxonomy in global institutional investment.

Country composition

As of 2024-25, the 24 countries in the MSCI Emerging Markets Index are:

The index is reconstituted through MSCI’s semi-annual index review (May and November) and quarterly index review (February and August). Countries can be added, removed, or reclassified.

India’s weight in MSCI EM

India’s representation in the MSCI EM Index has grown substantially over the past decade, reflecting India’s equity market capitalisation growth and improved foreign ownership accessibility:

India’s rising weight reflects consistent GDP growth, market capitalisation expansion, and increased inclusion of Indian stocks in the index following MSCI’s periodic addition of new India securities. India has become the second-largest country in the MSCI EM after China (which has ranged from 25-35% of the index), and in some sub-periods, India’s weight has approached China’s.

China and Taiwan concentration

The MSCI EM Index has historically been highly concentrated in China and Taiwan, raising questions about true diversification:

• China (including A-shares, H-shares, and ADRs): typically 25-35% of the index.
• Taiwan (semiconductor-dominated, primarily TSMC): typically 15-18%.
• South Korea: typically 11-13%.

These three markets often account for 55-65% of the index, meaning the MSCI EM’s performance is heavily influenced by developments in China’s equity market and the global semiconductor cycle.

Index construction methodology

• Market cap weighting: free-float adjusted; foreign investment limits and actual foreign ownership levels are incorporated into the free-float factor.
• Size segments: the standard MSCI EM covers large-cap and mid-cap stocks (approximately 85% of the free-float adjusted market capitalisation of each country). MSCI also publishes EM Small Cap, EM IMI (Investable Market Index, covering large/mid/small), and EM ex-China variants.
• Minimum market capitalisation: securities must meet minimum size and liquidity thresholds.
• Country classification: MSCI’s methodology uses market accessibility criteria (openness to foreign ownership, ease of capital flows, settlement infrastructure) to distinguish emerging from developed and frontier markets.

TRI variant and currency denomination

The MSCI EM Index is published in multiple return variants:

• Price Return Index (PRI): capital appreciation only, in USD.
• Gross Total Return Index (Gross TRI): assumes dividends are reinvested without any tax withholding.
• Net Total Return Index (Net TRI): assumes dividends are reinvested after deduction of applicable withholding taxes at the non-resident investor rate. This is the variant most commonly used for mutual fund benchmarking.

The MSCI EM Net TRI in USD is the reference for most international feeder funds, but Indian fund houses that benchmark against MSCI EM typically also account for the INR-USD exchange rate movement when presenting returns to Indian investors.

Historical returns (USD, Net TRI)

The MSCI EM has underperformed developed markets significantly in the post-2010 period, largely due to China’s equity market volatility, commodity price cycles affecting resource-heavy EM economies, and a strong US dollar that reduced USD-denominated EM returns. India-focused international investors sometimes prefer pure India funds over broader EM products for this reason.

Mutual fund usage in India

Indian AMCs offer feeder funds and fund-of-funds that invest in offshore funds benchmarked to the MSCI EM:

• Emerging market FoFs: funds that invest in overseas ETFs or active funds tracking MSCI EM. Examples: Mirae Asset Emerging Bluechip Fund (India mandate), various FoFs investing in Franklin Templeton, Invesco, or iShares EM ETFs.
• EM ETF feeder funds: Indian feeder funds investing in iShares MSCI Emerging Markets ETF (EEM/EEMV) or Vanguard Emerging Markets ETF.

SEBI’s overseas investment limit for Indian mutual funds (USD 7 billion per AMC, USD 1 billion per fund, with aggregate industry limit of USD 7 billion) constrains the scale of these offerings. Limits have occasionally caused AMCs to temporarily suspend subscriptions to overseas funds.

MSCI India sub-index

MSCI separately maintains the MSCI India Index, which covers NSE and BSE-listed large-cap and mid-cap stocks accessible to foreign investors. The MSCI India Index is used by FPIs (foreign portfolio investors) as their domestic India equity benchmark, but Indian domestic mutual funds rarely use it as a primary benchmark – domestic funds use NIFTY 50 TRI or BSE 500 TRI instead.

See also

• MSCI World (Indian MF benchmark use)
• S&P 500 (Indian MF benchmark use)
• Nasdaq 100 (Indian MF benchmark use)
• NIFTY 50 TRI
• Mutual fund
• AMFI

References

1. MSCI Inc. “MSCI Emerging Markets Index Methodology.” msci.com. Accessed 2026.
2. MSCI Inc. “MSCI Market Classification Framework.” msci.com. 2024.
3. MSCI Inc. “MSCI EM Fact Sheet.” msci.com. 2025.
4. SEBI. Circular on overseas investment limits for mutual funds. sebi.gov.in. 2022.
5. AMFI. “Overseas fund-of-funds benchmark data.” amfiindia.com. 2025.