Morgan Stanley came out with a report suggesting that India’s weight is likely to increase in the emerging market index, a report authored by Ridham Desai, and Sheela Rathi.
From April 1, 2020, India moved into a new regime on foreign limits whereby the FPI limit has been increased to the sector foreign limit. Over the next few months, Morgan Stanley expects MSCI to rebalance MSCI India weights to reflect this change.
MSCI India's weight in Emerging Market (EM) is likely to rise by 55bps and India's foreign inclusion factor (FIF) is likely to rise from 0.39 to 0.42 that could result in an incremental $1.3 billion of passive inflows.
Combined with this flow, Morgan Stanley expects active inflow to the tune of $5.7 billion taking the combined expected inflow to around $7 billion.
There are 26 stocks that are likely to benefit the most from this regime. The names include L&T, Asian Paints, Bajaj Finance, Nestle India, Divi’s Laboratories, Britannia Industries, Shree Cement, Tata Steel, and Bharti Infratel, the report highlighted.
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