Morgan Stanley Capital International (MSCI) has announced that it is going to consider changes in the foreign ownership limits (FOL) in the MSCI global indices for Indian stocks. MSCI will implement the changes along with the November 2020 Semi-Annual Index Review at the close of November 30, effective December 1.
The change is expected to rope in billions of dollars in active and passive flows for domestic stocks where the FOL will increase. According to a report by Morgan Stanley, MSCI India may see passive inflows of $2.5 billion post this move. Indias weight in MSCI EM will increase to 8.7 percent from current 8.1 percent, it added.
To describe it in laymans terms – if the individual FII limit is 50 percent and the sector limit is 74 percent, then 74 percent will be considered as a free-float, according to which the weightage will increase for certain stocks.
Recently, depository institutions CDSL and NSDL also increased the foreign ownership limit for all listed companies to their sectoral limits. MSCI further said that it welcomes the recent disclosure of the foreign investment limits for Indian securities by NSDL and CDSL addressing the concerns on the timeliness, quality and standardization of the data.
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