FTSE defers India indices rejig but MSCI may do it this week, these stocks may benefit

After inviting feedback from index users, FTSE Russell on Friday announced the decision to defer the implementation of the proposed changes to the investability weightage of its Indian constituents. In a statement, FTSE said, “In light of the current market conditions and with India continuing to be in lockdown due to the Covid-19 pandemic which adds to the uncertainty leading into the June 2020 FTSE GEIS quarterly review, FTSE Russell proposes to delay implementation and provide an update by 30 June 2020.” It was expected that the change in India’s weightage would attract foreign investors, resulting in healthy inflows to the Indian equity markets.

FTSE has now proposed implementing the changes in the September 2020 FTSE global equities index series semi-annual review, subject to confirmation by the end of June 30. The move that will see India’s weightage increase in the headline FTSE global indices, is proposed to be increased in four tranches starting September 2020. Each tranche will see a change of 25% according to FTSE.

Earlier last month, FTSE had said that the change in India’s weightage will be effective from June this year. “Indian index constituents, with a headroom adjustment, which are impacted by this update, will have their respective FOL increased in two 50% tranches, subject to the headroom remaining at 20% or above, in accordance with Foreign Ownership Restriction and Minimum Headroom Requirement policy,” FTSE said. India’s weightage could gain by 1.18% in the FTSE Global All Cap index while the World index would see India’s weightage gain by 1.17% while the emerging market index could see India’s weightage increase up by 1.43% to sit at 10.38% overall weightage in the index. 

The rejig in FTSE’s weightage has been aided by the changes made by the finance ministry in the foreign investment limit for listed companies in India. Earlier this year in MSCI (Morgan Stanley Capital Investment) has deferred the proposed rejig in India’s weightage in its indexes. A change in the MSCI indexes could flood Indian stock markets with more than Rs 52,000 crore, according to Morgan Stanley research. In a report, brokerage and research firm Motilal Oswal said it expected the revision in MSCI indexes to be effective from May 12, and funds to flow in on May 29. Kotak Mahindra Bank, MRF, L&T, and NTPC are some listed companies that Motilal Oswal expects to benefit the most in terms of foreign inflows once the MSCI rejig takes effect.