India fights back against MSCI as talks on weightage begin
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Mumbai: Hectic talks have begun between officials of MSCI and Indian regulatory and government officials on the issue of India’s weightage amidst signs that India is pushing back strongly against MSCI’s threat to cap weightage at current levels in its global indices.
Key MSCI officials met with the National Stock Exchange and the Securities and Exchange Board of India (Sebi) officials on Monday and are set to meet key finance ministry officials on Tuesday in New Delhi. NSE officials are already speaking to foreign investors in London and New York. A select group of Indian fund managers have begun lobbying their foreign counterparts on why India’s weightage should not be capped.
Last week, MSCI said that it was considering placing a few emerging markets including India on notice after those markets introduced certain restrictions in market accessibility.
An email query sent to MSCI seeking comment did not elicit any response till the time of going to press. NSE officials said that meetings with MSCI or others is part of their routine business deals and declined to comment further.
The controversy started after the three domestic bourses — the NSE, the BSE and the Metropolitan Stock Exchange — in February cancelled licensing agreements with overseas exchanges under which data feed on Indian stock and index prices was being shared.
MSCI accused countries such as India of imposing market accessibility restrictions that would not fully impair international institutional investors from accessing or investing in local markets but may nevertheless make the market less accessible and investable.
Some domestic fund managers accused MSCI of blackmailing India in the name of accessibility. India allows one of the most generous entries and exits to foreign capital as witnessed in the majority ownership of foreigners in most sectors, they said.
“MSCI wants to increase China’s weight from 28 per cent to 50 per cent despite putting several restrictions on FIIs in the last one decade,” one fund manager said. “Few like-minded fund managers are meeting large foreign institutions to apprise them about India’s position and requesting them not to allow MSCI to reduce India’s weight”.
Any changes in MSCI EM index will have a direct impact on $140 billion invested by foreign portfolio managers in India who track MSCI EM index, according to experts. India, the fourth-biggest country with a weight of 8.7 per cent in the MSCI Emerging Markets index is tracked by $1.6 trillion of passive wealth.
In the 2015-16 meltdown, China had introduced many measures to protect its falling market which restricted free functioning of markets and repatriation of foreign capital, another fund manager said.
HDFC Bank, India’s largest lender by m-cap, valued nearly $80 billion, is not part of MSCI index as there is no head room for investment by foreigners but Chinese bank majorityowned by the Chinese government are being allowed, another fund manager said.
Key MSCI officials met with the National Stock Exchange and the Securities and Exchange Board of India (Sebi) officials on Monday and are set to meet key finance ministry officials on Tuesday in New Delhi. NSE officials are already speaking to foreign investors in London and New York. A select group of Indian fund managers have begun lobbying their foreign counterparts on why India’s weightage should not be capped.
Last week, MSCI said that it was considering placing a few emerging markets including India on notice after those markets introduced certain restrictions in market accessibility.
An email query sent to MSCI seeking comment did not elicit any response till the time of going to press. NSE officials said that meetings with MSCI or others is part of their routine business deals and declined to comment further.
The controversy started after the three domestic bourses — the NSE, the BSE and the Metropolitan Stock Exchange — in February cancelled licensing agreements with overseas exchanges under which data feed on Indian stock and index prices was being shared.
MSCI accused countries such as India of imposing market accessibility restrictions that would not fully impair international institutional investors from accessing or investing in local markets but may nevertheless make the market less accessible and investable.
Some domestic fund managers accused MSCI of blackmailing India in the name of accessibility. India allows one of the most generous entries and exits to foreign capital as witnessed in the majority ownership of foreigners in most sectors, they said.
“MSCI wants to increase China’s weight from 28 per cent to 50 per cent despite putting several restrictions on FIIs in the last one decade,” one fund manager said. “Few like-minded fund managers are meeting large foreign institutions to apprise them about India’s position and requesting them not to allow MSCI to reduce India’s weight”.
Any changes in MSCI EM index will have a direct impact on $140 billion invested by foreign portfolio managers in India who track MSCI EM index, according to experts. India, the fourth-biggest country with a weight of 8.7 per cent in the MSCI Emerging Markets index is tracked by $1.6 trillion of passive wealth.
In the 2015-16 meltdown, China had introduced many measures to protect its falling market which restricted free functioning of markets and repatriation of foreign capital, another fund manager said.
HDFC Bank, India’s largest lender by m-cap, valued nearly $80 billion, is not part of MSCI index as there is no head room for investment by foreigners but Chinese bank majorityowned by the Chinese government are being allowed, another fund manager said.