MSCI's new methodology may trigger $850 mn outflow from equities

At the stock level, three companies - GAIL, ITC and L&T would account for almost two-thirds of the likely outflows

MSCI's new methodology to treat foreign ownership limit (FOL), if implemented, may trigger an outflow of $850 million from the Indian equity markets, says a recent India Strategy Report by Morgan Stanley. 

That apart, the foreign brokerage house expects 12 stocks, including blue-chips GAIL, ITC, Larsen & Toubro (L&T) and Dr Reddy's to see a significant weight reduction in the index. 

In a recent consultation paper, MSCI has proposed to change the FOL treatment methodology for India. At present, MSCI calculates FOL using the foreign portfolio investment (FPI) limit. They define the FPI limit to the extent up to which foreign portfolio