zashmaster
New member
The paywalled article is here: https://the-ken.com/story/nse-bse-and-the-benchmark-blues/
They have quite a few comments to make on MSCI indec since it has to rememeber the foreign holding limit in each stock. The main Nifty and BSE indeices are market cap weighted and don't suffer from distortions. It would have been mice if the article has explicitly stated this.
I presume that the summary below is OK for quoting.
"NSE, BSE, and the benchmark blues
With a US$3 trillion market cap, India’s stock market is the world’s eighth largest. And investors navigate this sprawl through benchmarks such as the S&P BSE Sensex and the Nifty 50. They provide context in a world of seeming chaos.
The power of these indices cannot be understated. A company that is chosen for an index is likely to see a huge surge in investments, especially from passive funds, which simply track these indices. With passive funds seeing their assets surge to US$44 billion over the past year, the unspoken power of indices only grew.
Take the case for Bharti Airtel—India’s second largest telco. In August last year, MSCI slashed Bharti’s weightage in the MSCI India Index from 3.5% to 1.8% and in the MSCI Emerging Markets Index from 0.285% to 0.144%. Bharti’s shares slid 4% in response to the news and analysts estimated that between Rs 3,500 crore (US$470 million) to Rs 3,800 crore (US$510 million) would be pulled out of the stock.
This sort of fallout naturally means increased scrutiny of the methodology of indexes, as any distortion on a large index can have a far-reaching ripple effect. But while the European Union already regulates indices, most other markets,...
"
They have quite a few comments to make on MSCI indec since it has to rememeber the foreign holding limit in each stock. The main Nifty and BSE indeices are market cap weighted and don't suffer from distortions. It would have been mice if the article has explicitly stated this.
I presume that the summary below is OK for quoting.
"NSE, BSE, and the benchmark blues
With a US$3 trillion market cap, India’s stock market is the world’s eighth largest. And investors navigate this sprawl through benchmarks such as the S&P BSE Sensex and the Nifty 50. They provide context in a world of seeming chaos.
The power of these indices cannot be understated. A company that is chosen for an index is likely to see a huge surge in investments, especially from passive funds, which simply track these indices. With passive funds seeing their assets surge to US$44 billion over the past year, the unspoken power of indices only grew.
Take the case for Bharti Airtel—India’s second largest telco. In August last year, MSCI slashed Bharti’s weightage in the MSCI India Index from 3.5% to 1.8% and in the MSCI Emerging Markets Index from 0.285% to 0.144%. Bharti’s shares slid 4% in response to the news and analysts estimated that between Rs 3,500 crore (US$470 million) to Rs 3,800 crore (US$510 million) would be pulled out of the stock.
This sort of fallout naturally means increased scrutiny of the methodology of indexes, as any distortion on a large index can have a far-reaching ripple effect. But while the European Union already regulates indices, most other markets,...
"