MORGAN STANLEY CAPITAL INTERNATIONAL

13th February, 2023 Economy

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Context

Global index provider MSCI has changed its weightage for four Adani Group stocks in its various widely tracked indices after reviewing how many shares are available in the “free float” category — that is, shares that can be freely traded without any restrictions.

Morgan Stanley Capital International

MSCI, or Morgan Stanley Capital International, is an American finance company headquartered in New York City.
It is an investment research firm that provides stock indexes, portfolio risk and performance analytics, and governance tools to institutional investors and hedge funds.
It is a leading provider of critical decision support tools, including stock indexes, and services for the global investment community. It has over 160,000 indexes in its portfolio.
MSCI is a global provider of equity, fixed income, real estate indexes, multi-asset portfolio analysis tools, and climate products.

MSCI Indices

MSCI indices are tracked by investors globally, who allocate funds based on weightage given to countries and stocks.
MSCI indexes are widely tracked by foreign portfolio investors, hedge funds, and other sovereign wealth funds which allocate funds to various markets like India depending on the overall weightage and direction given by these indexes.
At the core is its modern index strategy, which provides consistent treatment across all markets, followed globally by investors.
If India and its top listed companies get good weightage in MSCI indexes, foreign investors pump in more funds on that basis and vice versa.
MSCI has indexes for countries, regions, emerging markets, developed markets, small-cap, all-cap, and even Islamic indexes.
It selects stocks for its equity indexes that are easily traded and have high liquidity, with companies having high free float getting more weightage.
It prefers stocks that have active investor participation, and are without owner restrictions. These indices include enough stocks to represent the underlying equity market or the direction and performance of the market.
MSCI is best known for its benchmark indexes, including the MSCI Emerging Market Index and MSCI Frontier Markets Index.
The company launches new indexes every year.

MSCI Emerging Market Index

The MSCI Emerging Markets (EM) Index was launched in 1988, including 10 countries with a weight of about 0.9% in the MSCI ACWI Index. Currently, it captures 24 countries around the world, including India, and has a weight of 12% in the MSCI ACWI Index.
Foreign portfolio investors have been allocating funds to markets in India, China, Brazil, Indonesia, and South Africa, where returns are higher, mainly based on the EM Index

MSCI India Index

The MSCI India Index is designed to measure the performance of the large and mid-cap segments of the Indian market.
With 113 constituents, the index covers approximately 85% of the Indian equity universe.
The index is reviewed quarterly — in February, May, August, and November — with the objective of reflecting the change in the underlying equity markets in a timely manner, while limiting undue index turnover.

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