The Morgan Stanley Capital International (MSCI) has revised its Emerging Markets Free Index for India. Weightages of stocks were diluted, added and lowered. While 14 stocks were added to the index, 10 were deleted. However, two major changes that occurred were the lowering of Wipro’s weightage from 100% to 30%, and the addition of Zee Telefilms at 60% of its market cap. The changes in the India index will bring down the overall weightage from 9.08% to 7.45%.

Impact on Wipro’s stock

It is interesting to note the lowering of Wipro’s weightage. Looking back, we find that the decline in Wipro’s stock price started with the fall of the Nasdaq. The crash at Nasdaq did affect all the technology stocks back home—almost a bloodbath. The second phase of decline in the stock price happened after market corrections took place and Wipro’s stock, which was overvalued according to analysts, was hammered on the bourses. Wipro’s performance in the last fiscal has not been exceptional. And except for its infotech business, Wipro has not been able to perform well in its operations. An analyst with a domestic investment bank says that Wipro’s price was definitely overpriced and corrections had to take place. As far as liquidity and float is concerned, the daily volumes were very low and it was a disturbing sign that the price had shot up enormously. "It was difficult to sustain such a high price of the scrip," he says.

The lowering of weightages, according to MCSI, has been due to the low liquidity of stocks. But the liquidity of Wipro’s stocks has not changed since MCSI gave it a weightage of 100%. Some of the international fund managers had expressed concern over Wipro’s low float and said that though Wipro was the largest stock in the MSCI India index, yet no one could buy it.