Indian fund managers said the 1.5 percentage point cut in the India weightage in the Morgan Stanley Capital International (MSCI) index would have little impact locally.
The 14 new entries to the index are already in the kitty of most mutual funds for quite some time, they pointed out. Therefore, a fund manager, in order to post superlative performance, would now have to hunt for other stocks.
On the other hand, due to the reduction in weightage from 9.08 to 7.45 per cent, new foreign institutional investors (FIIs) may curb some investments to the Indian sub-continent, they added.
Ajay Srinivasan, managing director of Prudential ICICI Mutual Fund, said the MSCI index is grossly overplayed. "Being a benchmark index, most FII fund managers could be taking a view. However, among the Asian markets India's weightage may continue to remain bullish. Therefore, it doesn't prevent a fund manager from increasing his exposure to India over and above the MSCI index," he said.
Vasudev Joshi of HSBC Securities said the change in the MSCI index will not have any major impact. "Various India dedicated funds follow domestic indices like the S&P CNX Nifty, Sensex, BSE-200 and others. MSCI is usually followed by regional funds and their total investments are only 20-22 per cent of the FIIs' total funds. Besides, they are in any case underweight on the Indian markets."
"Although at the overall level, the Indian share is reduced from 9.08 per cent to 7.45 per cent, the weightage of ICE stocks (information, communication and entertainment) has increased by 2 per cent which in my opinion is very good. It is further important note that any inclusion or exclusion is done solely in a proprietary nature. Therefore not much impact is likely to be felt in the short-run," Vasudev added.
Gul Teckchandani of Sun F&C said that the changes in the MSCI should not have any impact in the markets. "The market capitalisation (of Indian stocks in the index) has in fact increased in the entire process, though in percentage terms there is a fall."
Ashutosh Bishnoi, president and chief executive officer of J M Mutual Fund felt that "the change at the benchmark indices like the MSCI would have some adverse impact at the Indian markets over a period of time. An FII would first refer to the MSCI index before investing in any company."
