MSCI (Morgan Stanley Capital International) has announced its official preview for May 2021 semiannual rebalance. There will be 6 additions and 1 deletion. All changes announced will be effective as of May 28 (close of May 27).
According to Morgan Stanley Execution services, MSCI India will see gross inflows of $2.8 billion and net inflows of $219 million. Thus, MSCI India to see a weight increase of 5 basis points with these changes from 9.65% to 9.74%.
Rebalancing the index
The six stocks added in the MSCI India index are – Adani Enterprises, Adani Total Gas, Adani Transmission, Bharat Electronics, Cholamandalam Investment, and SBI Cards and Payments. Zee Entertainment Enterprises has been deleted from the MSCI India index.
Investors all over the world track the indices of MSCI and global funds often build their portfolios on the basis of MSCI’s global indices. Still not clear about MSCI let’s understand the basics.
What is MSCI India Index?
Morgan Stanley Capital International (MSCI) has set up many global indices, one of which is a composite of Indian stocks-the MSCI India index. Many reputed Indian companies across sectors are included in the index. These companies amount to at least 85% of the total equity offered by Indian companies.
Why FIIs use MSCI India index
Foreign investors want international markets to invest their funds. They want to know more about the stability and volatility in the prices of shares. The MSCI India Index acts as an indicator of the soundness of the Indian capital market. The weightage of a company depends on its performance in different categories such as the total turnover, market capitalization and dividend return. The greater the weightage, the higher will be the amount of foreign investment into the stocks. In simple words, the amount of funds that a foreigner will invest in an Indian share will be directly dependent on the stock’s weightage on the MSCI index. If the weightage of a company is reduced then there is always a possibility of foreign investors withdrawing their funds.
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