Answering my own question now I have found the answer for the benefit of others:
When a specific stock category group is assigned in the location master then the sytem considers all the stock categories assigned to that category group while calculating the initial stock.
If no stock category group is assigned in location master then the system looks at the category group "ST1 - Opening stock" in SPRO and considers all categories in cat group ST1 while calculating the initial stock.
So to include CF / CI / any other cateogy in the initial stock calculation , all you have to do is assign those categories to ST1 category group . Once this is done you will be able to see the difference in your initial stock.
There is NOTHING required in MSDP_ADMIN. Tested and confirmed.