The global indices provider's announcement on Thursday coincided with the National Stock Exchange replacing SAIL and Sterlite with Lupin and UltraTech Cement in the benchmark Nifty 50. The MSCI changes will take effect from September 3 while Nifty changes will apply from September 28.
While both moves will have significant impact, MSCI's move is more material as the sheer quantum of funds pumped by overseas investors into Indian markets is much larger than what domestic funds allocate to Nifty stocks.
"Generally for FIIs, MSCI matters a lot... these will be more material than the changes in Nifty," said Gopal Agrawal, CIO, Mirae Asset Global Investments.
Apart from raising India's weight in its Emerging Market Index, MSCI raised mortgage financier HDFC's weight to 7.4% from 6.21% while reducing the weights of Tata Consultancy Services, Reliance Industries and Hindustan Unilever by 10 basis points (a tenth of a percentage point) each. MSCI has removed Bombay Rayon Fashions, Mindtree, Nava Bharat Ventures and Time Technoplast from the MSCI India Index.
This reshuffle will result in estimated foreign funds flow of nearly $126 million into HDFC, according to Morgan Stanley India.
The stocks that would be impacted negatively are Hindustan Unilever, with an outflow of foreign funds to the tune of $10 million, RIL $4 million and Infosys $3.8 million, it added.
Indian equities have attracted more foreign institutional flows than any other Asian market so far in 2012 as portfolio investments resumed in July on renewed hopes of policy action by the government to revive the economic growth. Foreign funds have poured close to $11 billion (Rs 55,000 crore) into Indian equities so far this year. A majority of the flows into India this year have been by exchange-traded and India-dedicated funds, brokers said.
Courtesy: The Economic Times