The Hindu Business Line : India weightage set to go up in Morgan Stanley index

Weightage impact
India's weightage in the MSCI Asia index may go up
Foreign funds flow into equity markets to gather more steam
Membership of an global index is regarded as positive over a long-term

Mumbai , May 6

Bharti Televentures, along with Reliance Communications, Suzlon Energy and NTPC are among the favourites expected to be included in the MSCI India Index, when the Morgan Stanley Capital International Inc (MSCI) announces the next quarterly revision of its indices on May 10.

Analysts are also betting on India's weightage in the MSCI Asia index to go up from the present 9.6 per cent in the quarterly revision, boosting global outlook on the Indian stock markets further.

MSCI, a leading provider of equity, fixed income and hedge fund indices, is popular with fund managers and institutions across the world.

Analysts said they expect foreign funds flow into the domestic equity markets to gather more steam, if MSCI decides to increase the weightage of India in the MSCI Asia index. At present, both Korea and Taiwan have the weightage, that are more than double that of India, though the market capitalisation of Indian markets is almost same as that of the other two Asian countries.

Korea, which has a market capitalisation of $745.6 billion, has a weightage of 25.7 per cent in the MSCI Asia index, while Taiwan with a market cap of $553 billion enjoys a weightage of 19.7 per cent. India, on the contrary, has a weightage of only 9.6 per cent, in spite of having a market cap of $671.6 billion, according to Sharekhan Ltd, a leading online stock brokerage.

Positive factor

"The inclusion of an Indian stock in the MSCI Asia Index will positively affect not only the foreign holding in that stock but also India's weightage in the MSCI Asia Index (ex-Japan)," an analyst with Sharekhan said. "If Bharti Televentures with a free-float market capitalisation of Rs 43,812.9 crore is included in the MSCI India Index, then India's weightage in MSCI Asia Index can go up by 0.5 per cent. However, a country's weightage in the MSCI Asia Index would vary, depending on how the indices of the other Asian countries are revised by MSCI," the brokerage firm said.

An official with a foreign brokerage ruled out an immediate run-up in the prices of stocks that are included in the MSCI Index. "Last year, when MSCI included stocks such as Arvind Mills, Bharat Electronics, Bharat Forge, Biocon and others, there was no major impact on the prices," he pointed out. However, a membership of an international index is regarded as positive over a long-term, the official added.

Hopefuls

Based on the free-float market capitalisation, some of the other companies that could make it to the MSCI India Index include Siemens, Sterlite Industries, Jaiprakash Associates, Punjab National Bank, Essar Oil, Indian Oil, HCL Technologies, Reliance Capital, SAIL, Bajaj Hindustan and Bank of Baroda, says Sharekhan, in a note to clients.

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