MSCI India to see inflows of $2.5B

MSCI India to see passive inflows of $2.5 billion as MSCI has confirmed that it will implement the new regime on the foreign ownership limits (FOL) changes in the November review.

"Last year, for the first time, we saw some action from the Government to fix this issue to some extent. While we wait for MSCI implementation, here we outline the potential impact. MSCI India's weight in MSCI EM will increase to 8.7% (weight increases for current constituents) and 8.8% (new additions) from the current level of 8.1%, and passive inflows of $1.93 billion and $0.6 billion, respectively," Morgan Stanley said in a report.

MSCI today in a press release confirmed that it welcomes the recent disclosure of the foreign investment limits for Indian securities by National Securities Depository Limited (NSDL) & Central Depository Services Limited (CDSL) addressing the concerns on the timeliness, quality and standardization of the data.

MSCI will implement changes in Foreign Ownership Limits (FOL) in the MSCI Global Indexes containing Indian securities coinciding with the November 2020 Semi Annual Index Review (SAIR) at the close of November 30, 2020, effective December 1,2020.

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: the cases where a higher limit is approved under the 'Government Route' or the cases where a lower limit is approved by the company's Board of Directors and its General Body.

MSCI is due to announce the results of its semi-annual index review on the morning of Nov 11, including a list of stock additions and removals along with changes in weightings.

"Further, we observe that MSCI India index tends to outperform before and post the announcement," the report said..