InvestorQ : Is it correct that MSCI is raising the weightage of India in the MSCI Index and what does it mean for markets?
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Is it correct that MSCI is raising the weightage of India in the MSCI Index and what does it mean for markets?

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2 years ago
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The MSCI has not yet increased India’s weightage. In fact, Morgan Stanley in its report has mentioned that two regulatory changes in the Budget could support the increase of India weightage. Firstly, the decision to allow FPI inflows to go up from the current 24% to the sector max level will result in more floating stocks. Also, the proposal to hike the public shareholding from 25% to 35% will also help in bringing more floating stock in the market. The MSCI has constantly complained to the Indian government that they cannot raise the weightage unless there is more floating stock so that issue should be addressed.

Of course, these may take some time fructify and hence the upgrade will happen only after that. But, Morgan Stanley estimates that if the above two changes are made then the MSCI could upgrade India’s weightage by more than 1.3% and that would result in inflows to the tune of $20 billion into India over a period of time. That will certainly be a big positive but for that the upgrade has to first happen. The MSCI EM index is important because most of the large global ETFs and passive investors benchmark their flows into India based on the MSCI EM index.

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