FPI outflows likely as MSCI plans to exclude DRs in calculating FOL

If the proposal gets a nod, India's weight in the MSCI Emerging Market index could reduce by 0.23 per cent to 8.55 per cent

MSCI has proposed changing its calculation methodology regarding foreign ownership limits (FOL) for Indian securities.

MSCI plans to exclude depository receipts (DRs) in calculating the FOL, making it equivalent to the foreign portfolio investment (FPI) limit. According to the index provider, many of the DRs have low levels of liquidity and are not easily accessible to investors.

MSCI will consider the lower of foreign institutional shareholdings (excluding DRs) set off against the FPI limits, or all foreign shareholdings (including DRs) set off against the sectoral limits.

If the proposal gets a nod, India’s weight in the MSCI Emerging Market index could reduce by