Analysts say MSCI India weightage cut will have little impact
Mumbai—According to market analysts the significant reduction in the India weightage by the Morgan Stanley Capital International (MSCI) Emerging Market Free (EMF) Index may have very little impact.
They said that while a few stocks may be impacted in the first couple of days, mainly due to the psychological damage of their weightage in the India basket being reduced, in the medium to short term however, it is unlikely that the MSCI rebalancing will have any great impact on either the market or portfolio inflows.
MSCI on Saturday had announced a 40 per cent cut in India’s weightage in the EMF from 7.5 per cent to 4.49 per cent.
The India weightage in the MSCI All Country World Index has also come down from 0.35 per cent to 0.12 per cent, a fall of 0.23 percentage points.
The number of companies in the Index has been reduced from 73 to 59, with the axe falling on prominent market favourites like Sun Pharmaceuticals, DSQ Software, Aptech, Jai Prakash Industries, Essel Packaging and Escorts.
Notable among the inclusions are Reliance Petroleum, VSNL and HDFC Bank. Of the total 59 stocks in the rebalanced Index, which comes into effect in two phases, first on November 30, 2001 and second on May 31, 2002, 13 are information, communication and entertainment stocks, five are from the pharma sector and another five are banking and finance stocks.
Dr Reddy’s Laboratories has the largest foreign inclusion factor (FIF)— akin to weightage— in the revised index at 0.59, followed by Silverline Technologies at 0.53.
In line with the revised MSCI methodology of adjusting country and stock weights for free floating stock adjustments, Wipro gets the least weightage at 0.15.

Arun Kejiwal of research outfit KRIS said, "analysts had mentioned in passing a decrease of 25-60 per cent. However, the final decrease of 40 per cent is bad news for the market. One could see the market moving down and remaining sideways for the better part of this week while another foreign foresaw no immediate impact on FII investment.
Portfolio managers said the changes will not have any immediate impact on foreign portfolio investments in the near term as the index will be implemented only by the end of the (calendar) year, and fully by middle of next year.
They said in times of a continuing US slowdown, India is perceived as a good hedge. This goes against the technical wisdom of classifying markets by value of free floating stocks alone.
Nilesh Shah, chief investment officer, Templeton MF said, "while there will be no short- term impact, we have to be careful of the long-term implications.
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EPF rates to be cut to 9.5 percent by government
New Delhi—The government is planning to cut interest rates on a government-administered retirement fund for employees to 9.5 per cent from 11 per cent prevailing now, said the Union labour minister on Saturday.
Satyanarayan Jatiya said the government had not accepted a suggestion of the central board of trustees of the employees provident fund scheme to reduce the rate to 10.25 per cent.
He said the finance ministry had opposed the suggestion of the board of trustees, saying that sustaining a rate of 10.25 per cent in the longer term would be difficult.
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