INSUBCONTINENT EXCLUSIVE:
India’s weightage in the MSCI Emerging Market index is set to rise as the Finance Minister on Friday confirmed implementation of the
Budget announcement of increasing the statutory foreign portfolio investment limit in a company from 24 per cent to sectoral foreign
investment limit effective April next year, said Morgan Stanley.
“Using the current list of constituents, we expect MSCI India’s weight
to rise by about 70 bps (basis points) in the semi-annual index review of May 2020, implying passive flows of US $2.5 bn (billion),” said
Morgan Stanley.
The foreign brokerage said MSCI India’s weightage in MSCI EM will go up to 9.6 per cent from 8.9 per cent.
Companies have
until March 31, 2020, to reduce the FPI limit through an approval of the board of directors and a special resolution passed by shareholders
Such companies will retain the option to increase the FPI limit to a maximum of the foreign sector limit at a later date.
“Once the FPI
limit increases, it cannot be reduced
Thus, unless companies pass board and shareholder resolutions, all companies in India will irreversibly have their FPI limit at the sector
limit after 31st March 2020,” said Morgan Stanley.
The foreign brokerage said India’s free float market capitalisation rank has been
lower compared to its market cap and GDP rank because of high promoter holdings and low foreign investment limits which has constrained
active and passive allocations to India from abroad.
Larsen - Toubro, Asian Paints, Bajaj Finserv, Bajaj Finance, Britannia, Tata Steel,
Bharti Infratel, Titan, Bajaj Auto, Tech Mahindra and Divi's Laboratories are among the stocks that are likely to see the most increase in
weightage given the subsuming of foreign limits.
Among the public sector stocks in the MSCI India index, NTPC, Power Grid, HPCL, Petronet
LNG, Container Corporation and REC could see an increase in weight.
Kotak Mahindra Bank, Bajaj Holdings, United Breweries, Power Finance
Corporation, Biocon, Indraprastha Gas, ACC and MRF are the large-cap stocks in the BSE 200 index that could be included from the subsuming