Definition
Emerging Markets
Emerging markets are developing economies with growing but less mature financial systems, offering higher growth and higher risk than developed markets; India is a leading example.
Emerging markets like India, China, Brazil and Indonesia attract global capital chasing faster growth, but carry greater currency, political and liquidity risk. They move together during global risk-on and risk-off swings.
India is a flagship EM, and global allocation decisions, often benchmarked to the MSCI EM Index, drive large FII flows into Indian stocks and bonds. EM assets typically sell off when the dollar strengthens or US rates rise, linking the rupee and Sensex to global conditions.
Related terms
- Dollar Index (DXY)The US Dollar Index (DXY) measures the dollar's value against a basket of six major currencies, dominated by the euro, serving as a global gauge of dollar strength.
- Risk-On / Risk-OffRisk-on and risk-off describe market regimes: in risk-on, investors buy equities and emerging assets, while in risk-off they flee to safe havens like bonds, gold and the dollar.
- MSCI Emerging Markets IndexThe MSCI Emerging Markets Index tracks large- and mid-cap stocks across developing economies and is the benchmark most global EM funds follow.
- Frontier MarketsFrontier markets are the smallest and least developed investable economies, riskier and less liquid than emerging markets, examples include Vietnam, Bangladesh and Nigeria.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.