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Like China that faced the wrath of the MSCI in 2015 for restrictive stock market policies leading to a severe crash in its markets, India too has come on the radar of the global index provider. MSCI, which has its emerging markets index followed by portfolio investors with some $1.6 trillion, has warned India of dire consequences for restricting foreign investor access to its derivative products.
On Wednesday, the MSCI termed the move by Indian exchanges to stop all licensing deals with their foreign counterparts as anti-competitive. Last week, the NSE and the BSE said they were withdrawing from a licensing deal with two overseas exchanges.
The Nifty index of the NSE is listed on Singapore bourse SGX and the Sensex is listed on Dubai bourse DGCX. Nifty is one of the world’s largest traded derivative indices and has billions of dollars worth of turnover on SGX.
8.4% weight in EM index
India has 8.4 per cent weight in MSCI’s emerging markets index, the fourth-largest behind China, South Korea and Taiwan. Chinese stock markets witnessed a historic crash in 2015 when MSCI said the country did not meet its criteria for being included into its emerging market indices. In the previous years the Chinese stock markets had seen a sharp run-up in anticipation of being included in the MSCI index. Nudged by the government and SEBI, Indian exchanges set a six-month ultimatum to end their deals with overseas exchanges.
“If the changes are put into effect, the result will be disruptive and harmful to international institutional investors in Indian equities,” New York-based MSCI Inc said in a statement on Thursday. It said it is monitoring the situation and warned India’s market classification could change unless the “restrictive measures” are removed.
“MSCI strongly suggests the Indian exchanges and their regulator reconsider this unprecedented anti-competitive action before it leads to any unnecessary disruptions in trading or a potential change in the market classification of the Indian market in the MSCI Indexes,” MSCI said.
“The breadth of the restrictions imposed by Indian exchanges is unprecedented in any equity market in the MSCI Emerging Market Series,” said MSCI.
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