1. Indian shares take MSCI’s China inclusion in stride; Sensex, Nifty unfazed by fund outflow fears

Indian shares take MSCI’s China inclusion in stride; Sensex, Nifty unfazed by fund outflow fears

MSCI's decision to gradually add China's large cap stocks to its Emerging Market Index failed to rattle Indian benchmark indices, which closed on a flat note despite concerns of increased fund outflows from India.

By: | Published: June 21, 2017 5:47 PM
BSE Sensex shed 13.89 points at close at 31,283.64 points while NSE Nifty lost 19.90 points to close at 9,633.60 points. (Image: PTI)

MSCI’s decision to gradually add China’s large cap stocks to its Emerging Market Index failed to rattle Indian benchmark indices, which closed flat despite concerns of increased fund outflows from India. MSCI, the giant US index provider, will add 222 China A Large Cap stocks, with an initial weightage of 0.73 percent in the MSCI EM Index, from next year.

This weightage could increase over time if China enacts further reforms, a Bloomberg report said.Many analysts said that this inclusion will cause a massive inflow of funds into China and this will cause fund outflows close to USD 200 million from India.

CLSA said in a report that the inclusion will cause India’s weightage in the MSCI EM Index to reduce by 6.51 basis points from 8.92 percent to 8.85 percent. The global brokerage house also predicted that India will see fund outflows of USD 214 million.

CLSA further added that China could see inflows of USD 15.9 billion due to this inclusion, whereas Goldman Sachs estimated the inflows into China to be at USD 12 billion.

Sharekhan had said that this inclusion will not have a major impact on the Indian markets as the outflow amount will be quite low.

“The inclusion of A-Shares will not have any major impact on the Indian market, given modest outflows of around USD 215 million, though the event could have a sentimentally negative impact in near term in some of MSCI heavy stocks,” Sharekhan said in a note.

“We were looking at 4-5 percent weight increase for China but that has now come down to almost 40-50 bps, so the net impact on India’s weight at best be 10 bps which could eventually lead to USD 200 million of outflows. This is not that much, considering the fact that we had USD 50 million of outflows yesterday. To that extent, it does not really impact holding of foreigners in India,” said Pramod Gubbi, Head of Equities at Ambit Capital in an interview with CNBC-TV18.

Indian markets ended today’s range-bound trading session on a flat note. BSE Sensex shed 13.89 points at close at 31,283.64 points while NSE Nifty lost 19.90 points to close at 9,633.60 points.

 

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