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Morgan goes weight-lifting

Mumbai, Nov. 15: A day after Moody’s said it could review India’s forex rating, Morgan Stanley Capital International (MSCI) today raised the country’s weightage in its emerging markets index by a few notches.

In the index, a gospel for foreign fund managers, India’s weightage was increased to 4.25 per cent from 4.21 per cent. Much of the gains flowed to consumer goods major Hindustan Lever, which has been pounded on bourses due to the slackening growth in sales.

India’s weightage in the MSCI Asia-Pacific Ex-Japan index also went up to 3.14 per cent from 3.12 per cent. The agency decided on these changes, to be effective from November 29, at its quarterly review of global indices on Thursday.

The revisions are modest, but experts said it cannot be brushed aside. Global portfolio managers rely on the indices to allocate money to shares in different countries.

Except for the Delhi-based Hughes Software Systems, which was dropped from the MSCI India index, other stocks in the index saw their weightages reworked by a few percentage points. The extra weightage arising from exclusion of Hughes was spread over other stocks.

The weightage of Hero Honda Motors in the India index has risen to 0.08 per cent from 0.05 per cent, while ICICI Bank’s has gone up to 0.23 per cent from 0.2 per cent.

There was speculation in the market that Hindustan Lever would turn out to be the biggest beneficiary when MSCI’s review takes place. The Consumer goods major had recently received permisiion from Reserve Bank to raise its limit on foreign fund holding to 49 per cent from the earlier 24 per cent.

Reliance is also expected to gain in the revision after it merged with Reliance Petroleum. Last year, MSCI moved to benchmarks based on free float — which reflect the number of shares in each market that are freely available for trading.

Last year, MSCI moved to benchmarks based on free float — which reflect the number of shares in each market that are freely available for trade from those based on market capitalisation. India’s weightage in its indices had gone down as a result.

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