Mumbai: Indian equities could see foreign inflows of $25 billion (bn) if minimum public shareholding is raised to 35%, maximum foreign investment limit in individual companies is linked to sectoral cap, and government sticks to its word of soon raising free float in state-owned enterprises to 25%, a Morgan Stanley report said.
The brokerage believes MSCI could hike India’s weight in its indices by over 146 basis points, as the enactment of these proposals would increase the free float of listed Indian companies.
India’s ranking in terms of the total free float market capitalisation has historically been lower compared with its total market capitalisation and GDP rank,
because of high promoter holdings and low foreign investment limits. MSCI has ranked India sixth in terms of market capitalisation, while its free float ranking stands at 13.
Foreign funds have, therefore, had to limit their exposure to Indian equities, Morgan Stanley said.