The majority of stocks in the MSCI India index have been listed for more than 20 years — among the oldest in the Asia Pacific region. On the other hand, China’s frontline equity index is the “youngest” in the region with an average listing age of just nine years, shows an analysis done by Goldman Sachs Global Investment Research. The average listing age for most Asia Pacific ex-Japan equity markets is between 20 and 25 years. Goldman Sachs listing age is “a good proxy for change and innovation”.
“The (MSCI India) index still remains dominated by financials and old-economy/traditional sectors. Lack of fast-growing new economy/digital stocks in the index has meant that India’s earnings have lagged the region, while the internet-heavy China index has delivered the best earnings over the past decade,” says the brokerage in a note.
Goldman Sachs projects the average listing age for India to reduce going ahead as large new-age companies enter the public markets. “Indian equity indices could see a larger representation of the new-economy sectors over the next 2-3 years as large digital IPOs get included in the index,” it says.
The entry of new-age companies will boost revenues but make indices pricier.
“Addition of new listings could increase the aggregate revenues of the MSCI India index by 20 per cent, on a pro-forma basis. However, the valuations for the index could rise given near-term negative earnings of few unicorns and expensive valuations of the digital tech companies,” says the Goldman Sachs note.