Assets Under Management AUM

Inflows to India could rise as foreign funds leave Russia

Mumbai: The Indian stock market may see additional foreign fund flows as, following sanctions imposed on Russian banks and companies, global fund managers have started to leave Russia.
On Tuesday, MSCI, the world’s largest index provider, announced that it would remove Russia and its companies from its indexes. That followed shortly after Norges Bank Investment Management, the world’s largest sovereign wealth fund with around $1.3 trillion in assets under management (AUM), which said on Monday it would exit Russian assets.
The outflow of foreign funds from Russia could mean that some of their investments, which were meant to go there, as well as the funds that investors will receive by selling Russian assets could now be allocated to India, according to a report by Edelweiss .
On Monday, Norwegian Prime Minister Jonas Gahr Store said the country had decided “to freeze the fund’s investments and had begun a process of selling out” Russia. As of December 2021, the country’s sovereign wealth fund had invested nearly $3 billion in Russia, according to a Reuters report. That could mean those funds would be deployed in select bluechips and mid-cap stocks in Asia and India could be one of the beneficiaries, a note from KR Choksey Shares & Securities noted.
On Tuesday, another Reuters report said that for MSCI, removing Russia from its indexes was a “natural next step”. Abhilash Pagaria of Edelweiss Alternative Research said that if MSCI removes Russian stocks from its emerging markets index and at the same time foreign portfolio investors (REITs) are not restricted to selling constituents on Russian stock exchanges, it could lead to 25 basis points (100 basis points = 1 percentage point) rise for India in the MSCI Emerging Markets Index.
A note from Edelweiss said that if Russia’s current weight in the MSCI Emerging Markets Index, at around 2.3%, is reduced to zero, then the four countries that will gain the most will be China, Taiwan, the India and South Korea. “Inflow into India based on current emerging market market capitalization could be $600 million, which will be mainly distributed in heavy indexes like Reliance Industries, Infosys, HDFC, ICICI Bank and TCS,” Pagaria said in the note. .