MSCI India rebalancing to stoke FPI inflow worth Rs 1,900 crore

India’s benchmark indices have rallied close to 30% since March 22, on renewed buying interest ahead of earnings release and most importantly coordinated efforts by global central banks to stimulate sagging economy, which is jolted by ongoing lockdown.

However, the gains were tampered by successive selling by foreign portfolio investors (FPI). This scenario is set to alter in the near term, thanks to expected rebalancing of MSCI India Index tracked by global investors.
In fact, the local equities are expected to see inflows to the tune of $250 million (Rs 1,900 crore) on account of the semi-annual rebalancing of the MSCI India Index. The index is tracked by funds worth $14 billion (Rs 1 trillon). The rebalancing is scheduled to take place on May 12, and the changes will become effective from June 1.
It is expected that Tata Consumer, Torrent Pharma, Jubliant Food, and Biocon are key inclusion candidates. These stocks are expected to see inflows in the range between $50 million (Rs 380 crore) and $85 million (Rs 640 crore).
Bharti Infratel, Shriram Transport, M&M Financial and Tata Power are likely to be excluded from the MSCI India Index.

These stocks will see foreign investor selling between $18 million (Rs 135 crore) and $27 million (Rs 200 crore).
In the rejig next month, MSCI will not alter India’s foreign ownership limit (FOL). India’s FOL is expected to go up — resulting in higher weightage in global indices —after the government increases foreign portfolio investor (FPI) investment limit to the sectoral limit. The call on increasing FOL will be taken in August.

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