MSCI's China Shares Delay Leads to Relief Rally in India

Mumbai: Indian shares rose more than 1 per cent on Wednesday with the broader Nifty heading towards breaking its seven-day losing streak, after index compiler MSCI Inc delayed the inclusion of Chinese domestic shares in its emerging markets index.

Blue-chip gains are in line with some of India's emerging market rivals from the Middle East and Thailand as MSCI's decision is seen maintaining the existing weighting of such markets in the MSCI Emerging Market Index.

MSCI has told China it must further liberalise its capital markets before it will include Chinese domestic shares in one of its global benchmarks, in a setback to Beijing's efforts to promote its currency and attract foreign capital.

MSCI added it expects China-listed shares to be incorporated once outstanding market accessibility issues are resolved - a move that could inject an estimated $400 billion of funds from asset managers to mainland shares.

"This rise is certainly a breather and can provide a relief rally in the near term," said Deven Choksey, managing director of K R Choksey Securities.

Rains and the passage of land reforms during the Indian parliament's budget session are also key, he added.

The Sensex gained 1.02 per cent while the Nifty rose 1 per cent.

Investors had earlier said Indian equities have already priced in a higher weight for China in the MSCI indices after falling nearly 12 per cent from record highs hit in March and can bounce back if those shares are not included.

However, UBS reduced its target on the Nifty to 8,400 from 9,200 citing slow pace of growth recovery and monsoon forecasts raising concerns over inflation.

Blue-chip stocks led the gains. Reliance Industries rose 2.7 per cent while Larsen & Toubro gained 2.1 per cent.

Market breadth was pretty strong with BSE's midcap and the smallcap index rising 1.1 per cent each.