India inflows may rise as foreign funds exit Russia - Times of India

India inflows may rise as foreign funds exit Russia – Times of India


MUMBAI: Indian stock market could see additional foreign fund flows as in the wake of sanctions on Russian banks and businesses, global fund managers have started exiting Russia.
On Tuesday, MSCI, the world’s leading index provider, said it will remove Russia and its companies from its indices. This came close on the heels of Norges Bank Investment Management, world’s largest sovereign wealth fund with about $1.3 trillion in assets under management (AUM), on Monday saying it would exit Russian assets.
Exit of foreign funds from Russia could mean some of their investments, which were to go to that country, along with the funds which investors will receive by selling Russian assets could now be allocated to India, a report by Edelweiss said.
On Monday, Norway’s Prime Minister Jonas Gahr Store said that the country had decided “to freeze the fund’s investments and have begun a process of selling out” of Russia. As of December 2021, the country’s sovereign wealth fund had nearly $3 billion invested in Russia, a Reuters report said. This could mean these funds would be deployed in some select bluechips and mid-cap stocks in Asia and India could be one of the beneficiaries, a note from K R Choksey Shares & Securities noted.
On Tuesday, another Reuters report said that for MSCI, removing Russia from its indices was a “natural next step”. Abhilash Pagaria of Edelweiss Alternative Research said that if MSCI removes Russian stocks from its emerging market index and at the same time foreign portfolio investors (FPIs) are not restricted to sell the constituents on Russian bourses, then it could lead to 25 basis points (100bps = 1 percentage point) rise of India in MSCI Emerging Markets Index.
A note from Edelweiss said that if the current weight of Russia in MSCI Emerging Markets index, at about 2.3% is reduced to zero, then four countries gaining the most will be China, Taiwan, India and South Korea. “The inflow in India as per current EM market-cap could be $600 million which will mainly get distributed in index heavy weights like Reliance Industries, Infosys, HDFC, ICICI Bank and TCS,” Pagaria said in the note.


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