The MSCI Index could also increase the weightings of ICICI Bank Ltd in the November shuffle to about 5.7%, which alone would draw in about $907 million in inflows (Photo: Reuters)
The MSCI Index could also increase the weightings of ICICI Bank Ltd in the November shuffle to about 5.7%, which alone would draw in about $907 million in inflows (Photo: Reuters)

Upcoming MSCI India index re-jig may see additional $1.5 bn inflow to equities

  • Brokerage firm Morgan Stanley reckons that ICICI Prudential Life Insurance, SBI Life Insurance and Siemens are likely to be included
  • Their combined new weightings could be about 1.8% if they are included in the index

Mumbai: The Indian markets could see inflows of as much as $1.5 billion in an upcoming MSCI India index re-jig that is due on 8 November.

In the semi-annual review of the MSCI India index, brokerage firm Morgan Stanley reckons that ICICI Prudential Life Insurance, SBI Life Insurance and Siemens are likely to be included. This could see inflows to the tune of about $614 million.

The MSCI Index could also increase the weightings of ICICI Bank Ltd in the November shuffle to about 5.7%, which alone would draw in about $907 million in inflows.

MSCI semi-annual index review on 8 November and the upcoming changes in weightings will be effective from 27 November. In its stock inclusion methodology, MSCI frameworks counts full market cap and free float market cap as an important criteria to include stocks in the MSCI index.

MSCI believes that the ICICI Prudential Life Insurance, SBI Life and Siemens India meet the criteria for inclusion into the MSCI India index. Their combined new weightings could be about 1.8% if they are included in the index. Morgan Stanley believes that the likelihood of inclusion in the index is high for ICICI Prudential Life and SBI Life, while Siemens has a low probability of inclusion.

Additionally, the latest shareholding pattern gives room to make the adjustments to the weightings of ICICI Bank in the MSCI index. The bank’s foreign shareholding come down in the recent quarter to about 54%, which gives room to increase the free float to 0.74 in the index. “We expect the weight of ICICI Bank to rise due to upward movement of the adjustment factor as foreign room on the stock goes above 25%," said Morgan Stanley in a note to clients.

Indiabulls Housing Finance Ltd and Glenmark Pharmaceuticals Ltd, however, could make an exit from the list. The potential outflows if these companies are excluded could be to the tune of $104 million.

Overall, this would increase the weight of Indian stocks in the MSCI EM index if all these stocks are included. “If all the above changes were implemented, India's weight in MSCI EM could rise by 37bps from the current level of 8.89%. Over the medium term, the proposed Finance Minister's announcement to increase the minimum statutory limit for FPI investment in a company be increased from 24% to the foreign investment limit of the sectors, has the potential to increase India's weight in MSCI EM by 81bps," said the Morgan Stanley report noted.

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