MSCI defers raising India’s weight in global indices | Economic Times

Mumbai: Global index management company MSCI has deferred raising India’s weightage in global indices, theoretically delaying fund inflows from bulge-bracket offshore money managers that typically use the gauges to allocate investment wallets across multiple geographies.But there is no unanimity yet on the amount of investment funds likely affected by the deferral. By some estimates, about Rs 10,000 crore worth of short-term passive inflows and Rs 40,000 crore in potential active inflows could be affected by the deferral in the rebalancing, an analyst described as a “foregone” conclusion.Stocks such as Larsen & Toubro, Asian Paints, Bajaj Finance, Nestle India, Divi’s Laboratories, Britannia, Tata Steel, Shree Cement and Bharti Infratel were expected to benefit the most from the rebalancing of India’s weightage.The delay would support stocks of Bajaj Auto, Infosys, TCS, HUL, HDFC, RIL and ICICI Bank, where weightage was expected to decrease due to the rebalancing.76740559According to an estimate by Morgan Stanley, the re-balancing could have increased India’s weight in the emerging market by 55 basis points (bps) and India’s foreign inclusion factor (FIF) could have increased from 0.39 to 0.42.India’s weight was scheduled for an upward revision by MSCI after the Centre changed the FPI limit for companies in October last year. Higher foreign investment limit would translate into a superior FIF, which would have helped raise India’s weightage in the MSCI EM index. FIF determines the total proportion of shares of a company that offshore investors can buy from exchanges. The higher the FIF, the higher is the weight on that security.So far in 2020, the FPIs are net sellers of $2.46 billion (18,513 crore) in Indian equities, one of the lowest among the major emerging markets, according to Bloomberg.Neeraj Agarwal, vice president — alternative research, Antique Broking, said that India’s weight increase in the MSCI index is a foregone conclusion given the change in the sectoral limits, although the timing of implementation is likely to be uncertain in the near term.The sectoral limits published by the National Securities Depository (NSDL) and Central Depository Services (CDSL) are new and more time is required for the market participants to test the disclosure mechanism, according to MSCI.“MSCI is waiting further clarification on the timelines, quality and standardisation of the data provided by NSDL and CDSL before making related changes to the MSCI indices,” the index provider said in a statement on Tuesday.India’s free-float market cap would increase from $356 billion to $385 billion on account of changes made to the calculation of FPI investment limits, according to Morgan Stanley.