India unlikely to benefit much from MSCI, FTSE purging Russian stocks

Mumbai: The removal of the Russian markets from MSCI and FTSE indices will not benefit Indian or other emerging markets (EMs) much, according to analysts. MSCI and FTSE Russell have announced deleting Russian equities at zero value from all the global and regional indices.

"With the ongoing restrictions, FIIs (foreign institutional investors) are not allowed to trade Russian equities. Thus, index constituents will be deleted at a zero value," said Abhilash Pagaria, head, Edelweiss Alternative Research. "Post the adjustments, Russia's weight should get redistributed among all the countries in the indices. The possible weight increase for India will be very minuscule at 15-20 bps (basis points); thus, there will be no benefit in terms of flows."

MSCI will now call Russia a standalone market. MSCI standalone markets are not included in any widely followed passive indices like the MSCI Emerging Markets Index or MSCI Frontier Markets Index, resulting in passive funds staying away from them, according to Edelweiss.


The decision will be implemented in a single step across all MSCI indices as of the close of March 9.

Effective March 4, FTSE will remove Russia index constituents that are listed on the Moscow Exchange.