MSCI indices rejig: $2.5 billion to enter Indian market

Our Bureau Chennai | Updated on October 27, 2020

Kotak Bank, IPCA Lab, PI Ind to enter MSCI Global Index, says Morgan Stanley Research note

Ending months of suspense, major global index provider MSCI will implement changes in Foreign Ownership Limits (FOL) in the MSCI global indices containing Indian securities, coinciding with the November 2020 Semi Annual Index Review.

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Morgan Stanley Research expects MSCI India to see passive inflows of $2.5 billion on this. Kotak Mahindra Bank, PI Industries and IPCA Lab will enter the MSCI Global Index, it added.

In a release, MSCI said it welcomes the recent disclosure of the foreign investment limits for Indian securities by National Securities Depository Ltd and Central Depository Services Ltd addressing the concerns on the timeliness, quality and standardisation of the data.

FOL changes from December 1

The global index major will implement changes FOL in the MSCI Global Index containing Indian securities coinciding with the November 2020 Semi Annual Index Review at the close of November 30, effective December 1.

Also read: Why not a simultaneous overseas listing of LIC?

According to Morgan Stanley Research, Asian Paints will see the biggest inflow of $209 million, followed by Bajaj Finance ($207 million), L&T (139 million), Britannia Industries ($123 million) and Nestle India ($120 million).

The weightages of consumer discretionary, consumer staples, healthcare, industrials, materials and utilities will increase by 0.3-0.8 percentage points.

Shares such as Apollo Hospitals and L&T Infotech have 'high' potential to enter the index while LIC Housing Finance, REC and Shriram Transport Co have 'medium to high' potential and Muthoot Finance has a 'medium' potential, the research note said.

The FOL changes result from the relaxation of the foreign portfolio investor (FPI) limit of Indian companies to the sectoral limit.

The FOL for securities in the MSCI India Equity Universe would be equal to the limit as per the 'Automatic Route', except in cases where a higher limit is approved under the 'Government Route', or in cases where a lower limit is approved by the company's board of directors and its general body, the index major said in a release.

MSCI India's weight in MSCI EM will increase to 8.7 per cent (weight increases for current constituents) and 8.8 per cent (new additions) from the current level of 8.1 per cent, and passive inflows of $1.93 billion and $0.6 billion, respectively, Morgan Stanley Research said.

FTSE Russell index revamp

Meanwhile, all eyes are now on the FTSE Russell index revamp. “In the light of the current market conditions and with India continuing to be in lockdown due to the Covid-19 pandemic, which adds to the uncertainty leading into the June 2020 FTSE GEIS quarterly review, FTSE Russell proposes to delay implementation,” FTSE Russell had said in May, and again postponed the decision in June.

Published on October 27, 2020

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