MUMBAI: A rejig of the
MSCI index
, one of the most popular indices among
foreign fund managers
, is increasing India’s weight from 18.3% to 19% by this month-end that has the potential to bring in additional
foreign investments
worth about $2.5 billion.
Late on Tuesday, MSCI said that stocks of 13 Indian companies will be included in its Global Standard Index, effective May 31.
Several others were included in MSCI’s smallcap index as well.
A report by Nuvama Alternative & Quantitative Research noted that because of the rejig, India is expected to witness a net foreign fund inflow of more than $2.5 billion through passive schemes. “With 13 inclusions and three exclusions, the net stock count post-rejig will be 146 for India in the MSCI Standard/EM Index. Additionally, there will be a net inclusion of 14 stocks in the Smallcap Index, bringing India’s total stock count in the small-cap index to 497.”
There are at least three major factors for this sharp jump in India’s weight in MSCI indices. First, India standardised foreign ownership limits in 2020. In the last few years, Indian equities have shown robust performance, particularly the mid-cap segment, leading to numerous inclusions in every review. And then there has also been relative underperformance by other emerging market packs, especially China, Nuvama analyst Abhilash Pagaria said.
Currently, China has the highest representation in the MSCI EM Index that has a weight of 25.7% with 703 Chinese stocks included in the index. In comparison, India’s 18.3% weight is from 136 stocks.
