Morgan Stanley Expects Power Grid And Pidilite To Be Included In MSCI India Index

Morgan Stanley expects India’s weight in the MSCI Emerging Market index to fall 20 basis points by August, when the full impact of the inclusion of China’s A-Share index kicks in.

This is based on the assumption that weight of China A shares post inclusion will be increased to 5 percent in two tranches by August, the brokerage said in a report. The impact on India is premised on “all things being equal”; that is, no further changes in weights of any countries in the index.

A 20-basis point drop in weight could potentially lead to outflows of around $540 million from Indian markets as passive funds adjust their portfolios, said Morgan Stanley. Global passive funds tend to mirror the MSCI indices and often make adjustments to their portfolios when the index composition changes.

Stock Specific Changes

In its report, Morgan Stanley also picks stocks which it believes have potential to be included in the MSCI India index.

Power Grid and Pidilite Industries are “high conviction” stocks that can make it to the index, said the Morgan Stanley report. The rationale for including these stocks is that they have sizable market capitalisation.