The problem for a number of corporates will be that if MSCI decides to peg weights to the limits each corporate has, then the weightages will alter dramatically, as many have not yet passed board resolutions to go up to the permitted maximum level of 40 per cent FII holdings. For them, pegging the weights to their existing limits (of 24 per cent or 30 per cent of equity) may bring down their weightages.

MSCI has announced that on Sunday, December 10, at 12.15 pm Central European Time, it will announce its decision on free-float adjusting constituent weights and increasing the target market representation on the MSCI Standard Indices. This will include the MSCI India Index which has some 61 stocks.

For Indian corporates, the issue is simple: once the MSCI's weights move to the free-float (floating stock available in the market) concept, their FII limits will come into play, since the MSCI indices are oriented only for foreign investors and that is the relevant limit for them.

The move towards a free-float adjusting weightage is significant for Indian corporates as a number of frontline market heavyweights have huge market capitalisation, but very low floating stock. "Pegging it to the entire market capitalisation is meaningless in such a scenario, since the actual floating stock is very low. The relevant benchmark should, therefore, be the actual floating stock in the market and, in this case, the FII limits," a frontline investment banker tracking the MSCI developments told The Financial Express.

Frontline corporates are, therefore, keen that the free-float adjustment should take into account the maximum permitted by the country, in India's case 40 per cent, and not take individual limits into account. For example, if a company has an existing maximum FII limit of 24 per cent, the weightage, these companies feel, should take into account 40 per cent, which is the limit permitted in the country.

"It makes no sense for companies to merely hike the limit to 40 per cent when their actual FII holdings are much lower. But they should not suffer on their weightages on that account too," a top executive at a major corporate house said. "But if individual limits are considered, then we will immediately hike our limit to 40 per cent," a top corporate house source said.

In fact, sources say if the overall market cap of the country goes down as a result of taking into account lower FII limits, then India's weightage in the MSCI Asia-Pacific index may also come down from the present level of about 7 per cent to 5.5 per cent or so, since the country's overall market cap being considered will decline.

However, fund managers familiar with the developments said the issue clearly was whether the new weights would take into account 24 per cent, 30 per cent, or 40 per cent for companies within these limits, or take an overall country limit of 40 per cent. "Nothing is clear as yet on what limits the weights will be pegged to," sources said.

However, there are also indications that the changes may be staggered, and not implemented at one go. This means companies may also have time to pass the required board resolutions to be in tune with the MSCI changes.