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India’s weight in the MSCI Emerging Market (EM) index is likely to fall 20 basis points by August on inclusion of China A-Shares. The latter’s weight could rise to five percent in two tranches by August, media reports quoting Morgan Stanley suggest.
In June 2017, MSCI had announced that beginning June China A-shares will be included in MSCI EM and MSCI ACWI (All India World Index) indices. The inclusion of China A-shares and fall in India’s weightage by up to 20 bps could results in outflows of around $540 million by passive funds.
Global passive funds tend to mirror MSCI indices and often make adjustments to their portfolios when the index composition changes, the report stated. India’s weightage in the MSCI EM index is 8.5 percent at present.
The MSCI will announce results of its semi-annual index review on May 15 and the changes will be effective June 1. Morgan Stanley, media report suggests, believes that Power Grid and Pidilite Industries may be the two ‘high conviction’ names that could be included in the MSCI India index.
Stocks like Avenue Supermarts, Future Retail, HDFC Standard Life Insurance and InterGlobe Aviation are the other likely contenders.
Morgan Stanley is of the view that Tata Motors DVR and Vakrangee could be excluded from the index. The drop in free float market capitalisation of both stocks could be the rationale for their exclusion, the report stated.
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