India Stocks May Reap $2.5 Billion Inflow on MSCI Index Changes
A data graph tracks the movement of stocks on the stock exchange in Germany. (Photographer: Alex Kraus/Bloomberg)

India Stocks May Reap $2.5 Billion Inflow on MSCI Index Changes

India’s stock market will see a net inflow of about $2.5 billion from the next round of changes to MSCI Inc.’s indexes, according to Morgan Stanley.

Existing members of the MSCI India Index will gain $1.93 billion in new passive funds after the implementation of new foreign ownership limits, while potential additions to the gauge -- namely Kotak Mahindra Bank Ltd., agrochemical maker PI Industries Ltd. and drugmaker IPCA Laboratories Ltd. -- will get a total allocation of about $0.6 billion, analysts wrote in a note.

India’s weight in the MSCI Emerging Markets Index will rise to as much as 8.8% from the current level of 8.1%, analysts Sheela Rathi and Ridham Desai said.

The inflows are likely to burnish India’s position as the only stock market in emerging Asia excluding China that has seen a net foreign inflow this year. Overseas investors have pumped $6.35 billion into Indian stocks year-to-date even as the nation grapples with the world’s second-largest coronavirus caseload and a historic economic contraction.

India Stocks May Reap $2.5 Billion Inflow on MSCI Index Changes

The foreign ownership limits for Indian members of MSCI measures will be altered following rule changes by the nation’s share depositories, the index provider said in a statement. Investment ceilings will be either raised or kept the same for most stocks, according to a simulation done by MSCI.

Existing members that will get passive foreign inflows of more than $100 million include Asian Paints Ltd., Bajaj Finance Ltd., Britannia Industries Ltd., Larsen & Toubro Ltd. and Nestle India Ltd, according to Morgan Stanley. Those stocks all advanced, in a range of 2.7% to 5.5% as of 1:44 p.m. in Mumbai.

Gains were also seen in stocks that have been touted as potential additions in the next review of MSCI’s key gauge for Indian equities. Kotak Mahindra surged almost 12% intraday and was set for its highest close since March, boosted also by strong profits and speculation it may seek an acquisition. IPCA jumped as much as 9.2% and PI Industries gained 1.6%.

MSCI will implement its new foreign ownership limits at the close of Nov. 30, when changes due from its semi-annual review will also become effective. The index provider is due to announce the results of the member revamp on Nov. 10, according to its website.

©2020 Bloomberg L.P.

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