The MSCI Index stands for the Morgan Stanley Capital International Index. This index is like a benchmark for various global equities and stocks. It lists stocks according to their global importance and their performance. It highlights their performance and growth in various aspects in the values of the index.
Why Is MSCI Important?
This index holds its importance in the financial and money world. Being listed on the index increases the confidence of the investors in the particular stock, and drives up its demand and hence its prices too. While on the other hand if some company is suddenly removed from the index, it is associated with a negative market sentiment and falling prices on the chart.
How Does The Index Work?
This index, which happened to develop back in 1986, was created by the MSCI Inc. This was a leading investment banking firm of the time. This index covers a number of equities from different regions of the world. These include the stocks from the emerging as well as the developed markets.
How It Works In The Indian Context
So, in India too, this index ensures how much foreign exchange is attracted to the country in the form of investments. It helps the investors to assess how the Indian economy and certain stocks in particular are performing and helps them with their investment decisions.
This MSCI India index in particular measures the performance of various mid and large cap Indian companies. This serves as a guide to foreign investors. This index is actively followed by institutional investors, HNIs, fund managers, and research analysts as well.
How The Index Is Constructed?
This index is constructed based on the equities’ market performance. They are listed according to their market capitalization, liquidity, growth prospects, etc. The index is revised periodically to ensure its relevance in an extremely dynamic environment. Here, companies are added and removed based on multiple criteria.
Importance For India
The index is extremely important for the foreign sector, considering that it guides them in making informed decisions. At the same time, the significance also extends to India, as the presence of a stock on the index, determines its attractiveness at a global level and the foreign investment inflow as well.
Just this week India’s weightage has increased from a mere 8% to a whopping 20% in the MSCI EM index (Emerging Markets). This is expected to have a positive impact on FII. The increase was driven by the inclusion of 7 Indian companies to the index. These were- RVNL, Dixon Technologies, Oil India, Vodafone India, Oracle Financial, Prestige Estates and Zydus Lifesciences. How this impacts FII is to be seen.
