MEMBER'S LOGINX
| Login Failure | ||||||||
|
||||||||
| Sign Up | Forgot Password? | ||||||||
- Home
- Outlook Arena
- Dec 11, 2000 - MSCI recast: What does it imply?
MSCI recast: What does it imply?
The Morgan Stanley Capital International (MSCI) recast has stirred up an apprehension of the expected money flows into emerging markets, particularly India. This was because of the proposed change in weightages for companies. Presently, constituents are included at 60% of the current market capitalisation. This would go upto 85% of the free float–adjusted market capitalisation.
MSCI has announced that it would publish the index constituents for each of MSCI’s Standard country indices and their inclusion factors under the new methodology before June 30, 2001. We take a look at the basic methodology and what it could mean for the top Indian stocks.
MSCI has defined free float as the proportion of share capital that is deemed to be available for purchase in the public equity markets by international investors (FIIs). As a general rule, the free float of a security is its total number of shares outstanding less the holdings of the strategic investors (read promoters).
| Company A | Company B | |
| Total O/s shares | 10,000,000 | 10,000,000 |
| No. of strategic shares | 4,100,000 | 8,780,000 |
| Strategic shareholding | 41.0% | 87.8% |
| Free Float | 59.0% | 12.2% |
| Inclusion factor | 0.60 | 0.12 |
| Source: www.msci.com | ||
For countries, such as India, where the government has imposed a limit on FII shareholding (40%), the free float available to the shareholders is the lesser of the free float as defined earlier and the foreign ownership limit. Since most of the Indian companies have yet to pass resolutions allowing the limit of foreign shareholding to be raised to 40%, the inclusion factor for them could be lower. This explains the rush on the part of Reliance to raise its FII limit to 40%.
| Company C | Company D | Company E | |
| Total O/s shares | 10,000,000 | 10,000,000 | 10,000,000 |
| No of strategic shares | 8,100,000 | 4,000,000 | 4,000,000 |
| Those held by foreigners as strategic | 1,000,000 | 1,000,000 | – |
| Strategic shareholding (%) | 81.0% | 40.0% | 40.0% |
| Free Float | 19.0% | 60.0% | 60.0% |
| Foreign ownership limit | 33.3% | 33.3% | 33.3% |
| Foreign limit less Foreign strategic holding | 23.3% | 23.3% | 33.3% |
| Free Float available to FIIs | 19.0% | 23.3% | 33.3% |
| Inclusion factor | 0.20 | 0.25 | 0.33 |
| Source: www.msci.com | |||
Infact in quite a few Indian companies, the promoters’ holdings themselves seem to exceed over 60%. In companies such as Wipro, the promoters’ holding exceeds 75%. Such companies could see a rather sharp reduction in their weightage over the next one year.
| Indian Companies | Promoters holding |
| IOC | 91.0% |
| Nalco | 87.0% |
| Dabur | 78.5% |
| Wipro | 75.0% |
| UTI Bank | 73.2% |
| Sun Pharma | 73.0% |
| Pidilite | 72.5% |
| IDBI | 72.0% |
| Corporation Bank | 68.3% |
| Zee Television | 66.6% |
| BPCL | 66.0% |
| P & G | 65.0% |
| ICICI Bank | 62.2% |
| IPCL | 60.0% |
| SBI | 60.0% |
| Aptech | 46.0% |
| Mastek | 45.0% |
| For PSU's it signifies government holding | |
Overall, it could mean that the Indian markets would have to rely on domestic liquidity or new inflows into foreign mutual funds rather than asset allocation to the region.
More Views on News
India's QE and the Stock Market (Fast Profits Daily)
Apr 14, 2021In this video, I'll tell you how the RBI's new quantitative easing program could affect the stock market.
Don't Write Off Yet This Sector Yet (Profit Hunter)
Apr 14, 2021Will apps like Netflix deal a death blow to theatres? Find out here...
Best Banking & PSU Debt Funds to Invest in 2021 (Outside View)
Apr 13, 2021PersonalFN explains the outlook for Banking & PSU Debt funds and the best Banking & PSU Debt funds that can be considered for investment in 2021.
India: Recovery Stalled by Vaccine Games? (The Honest Truth)
Apr 13, 2021Ajit Dayal on how India's vaccine strategy will impact the markets.
Why Did the Market Crash on Monday? (Fast Profits Daily)
Apr 13, 2021In this video, I'll you what I think is the real reason behind yesterday's market crash.
More Views on NewsMost Popular
4 Stocks to Make Your Portfolio Immune to the Second Covid Wave (Profit Hunter)
Apr 6, 2021Rather than predicting the market, successful investing is more about preparing well and placing your bets accordingly.
If the Market Falls, I Will Do This... (Fast Profits Daily)
Apr 1, 2021What should you do if the market falls? In this video, I'll tell you what I will do.
The Indian Real Estate Party Has Just Begun (Profit Hunter)
Apr 1, 2021A favourable demand supply scenario makes a strong case for real estate prices.
India: Recovery Stalled by Vaccine Games? (The Honest Truth)
Apr 13, 2021Ajit Dayal on how India's vaccine strategy will impact the markets.
The Dilemma of Investing in Bharti Airtel 
(Views On News)
Apr 1, 2021
Rahul Shah on whether Bharti Airtel will emerge as the next big thing in the Indian stock market
MoreOUR TOP 5 IDEAS
- India's Revival: A Once-in-a-generation Wealth Making Opportunity
- Are You Making One of These 15 Costly Mistakes While Investing. Learn more!
- Covid-19 Proof Multibagger Stocks - Download this FREE Report Now
- Free Report: The Secret to Increasing Your Trading Profits Daily!
- No Guessing, No Hunches, and No Missed Trends Ever! Join Us on YouTube Now.
S&P BSE SENSEX
Apr 13, 2021 (Close)
MARKET STATS
ABOUT EQUITYMASTER
Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.
FREE NEWSLETTERS
PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
- Basics of Value Investing
- Benjamin Graham
- How to Invest in Gold
- How to Invest in Silver
- Best Stocks to Buy Today
- Warren Buffett - The Value Investor
- The Best Small-cap Stocks to Buy
- The Best Bluechip Stocks to Buy
- Your Ultimate Guide to Penny Stock Investing
- 10 Rules for Successful Long-Term Investing
- How to Invest in the Share Market
- Momentum Moves
FOLLOW
APP
Copyright © Equitymaster Agora Research Private Limited.
Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap
Equitymaster Agora Research Private Limited (Research Analyst) 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster requests your view! Post a comment on "MSCI recast: What does it imply?". Click here!
Comments are moderated by Equitymaster, in accordance with the Terms of Use, and may not appear
on this article until they have been reviewed and deemed appropriate for posting.
In the meantime, you may want to share this article with your friends!