According to a Reuters report, Nuvama Alternative & Quantitative Research noted that the increase can be credited to several factors, including India’s implementation of standardised foreign ownership limits (FOL) in 2020, the continuous upswing in domestic equities, and the comparative underperformance of other emerging markets, notably China.
India currently ranks second in terms of weightage on the MSCI Global Standard index, just behind China.
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Nuvama also pointed out that with a consistent flow of investments from domestic institutional investors and steady participation from foreign portfolio investors, India has the potential to exceed a 20% weight in the MSCI Global Standard index by early 2024.
In the February review, MSCI added five Indian stocks to its Global Standard index without removing any, a move that underscores the growing confidence in India’s market. Conversely, the index provider removed 66 Chinese stocks while adding five new ones, indicating a shifting landscape in global markets.
Notably, state-owned lenders Punjab National Bank and Union Bank of India joined the large-cap index, while Bharat Heavy Electricals and NMDC were included in the mid-cap index. Additionally, GMR Airports Infrastructure was moved from the small-cap to the mid-cap index.
Nuvama Alternative & Quantitative Research estimates that India could experience passive inflows of up to $1.2 billion from foreign portfolio investors into the standard and small-cap indexes following the February review.