Sensex, Nifty gain on hopes of higher inflows after MSCI Index rejig

Hopes of higher foreign inflows into local mkts after change in foreign ownership limits drive rally

Indian shares ended higher on Tuesday, fuelled by hopes of higher foreign inflows into local markets after MSCI said it would revise its global indices to reflect changes in the country's foreign ownership limits.

The Nifty50 index closed up 1.03 per cent at 11,889.4, while the Sensex ended 0.94 per cent higher at 40,522.1.

MSCI said on Monday it would implement changes in foreign ownership limits (FOL) in the MSCI global indexes containing Indian securities in November.

Morgan Stanley said in a note it expects the MSCI India index to see passive inflows of $2.5 billion following the changes. It also listed Kotak Mahindra Bank and IPCA Laboratories as potential inclusions to the index.

MSCI India's weighting in the emerging market index could also rise to 8.7 per cent from 8.1 per cent, Morgan Stanley said.

The news helped the domestic market buck broader weakness due to worries over rising coronavirus cases globally.

“With the sharp plunge in the US markets yesterday, the reparations should have been felt in India too, but the MSCI news came as a knight in shining armour,” said Ajay Bodke, the chief executive at Prabhudas Lilladher.

“The price movements seen today are essentially on the stocks that would be the largest beneficiaries from the MSCI changes.”

Indian securities depositories NSDL and CSDL in April revised foreign investor ownership limits for Indian stocks, but MSCI said in June it was awaiting further clarifications from the depositories before making changes to indexes.

Kotak jumped over 11 per cent on Tuesday, helping the Nifty private banking index rise about 3.12 per cent. IPCA Labs gained 12.5 per cent.

Financial sector heavyweight HDFC Ltd was the biggest loser, declining 2.1 per cent.

Telecom operator Bharti Airtel and automaker Tata Motors are scheduled to report earnings later in the day.