MSCI Nov Rejig: India to see $2.5bn passive inflows; HDFC Bank’s weight to rise
The November round of rejig in Morgan Stanley Capital International (MSCI) indices will be effective from today, which could attract around $2.5 billion in inflows in Indian equities, as per Nuvama Alternative & Quantitative Research report.
“India is expected to witness a net inflow of approximately $2.5 billion in Foreign Institutional Investors (FII) passive flows,” Nuvama says in a report.
The report notes that India has once again achieved a major milestone in this rejig, as its representation in the MSCI EM Index is set to increase from the current 19.3% to closer to 19.8%. “This increase in weight, in terms of basis points, is the highest among any EM Index in this rejig.”
As per the report, there will be 5 inclusions and no exclusions in MSCI quarterly rejig, with the net stock count for India will be increasing from 151 to 156 in the MSCI Standard/EM Index. Additionally, there will be a net inclusion of 13 stocks in the smallcap index, bringing India's total stock count in this basket to 525.
Currently, China has the highest representation in the MSCI EM Index, with a weight of 27% and 598 members in the index, compared to India's 19.3% weight with 151 stocks. There is enormous potential for far more additions to happen for India. Stay structurally bullish on India.
Among individual stocks, private sector lender HDFC Bank will be in focus, as its weightage will increase. Nuvama in its report says that the weight increase of HDFC Bank will result in an inflow of around $1.9 billion, which is equivalent to 6.5 days of average daily volume (ADV). “The final tranche of float-led weight adjustment is very well going to happen, potentially resulting in an inflow of approximately USD 1.9 billion, which is equivalent to 6.5 days of ADV,” the report noted.
On the other hand, the global index provider did not include Adani Energy Solutions in the November Index Review amid concerns about the stock's free float. Besides, it has reduced the float in two Adani Group entities - Adani Green Energy and Adani Power.
As part of MSCI Global Standard Index rejig, BSE, Voltas, Alkem Laboratories, Kalyan Jewellers and Oberoi Realty will be now included in this basket, leading to a cumulative passive fund inflows of $1,238 million. In the MSCI India Smallcap Index, 13 more stocks to be added, including Eureka Forbes, Signature Global, Aadhaar Housing Finance, Indegene, PC Jewellers, and DCM Shriram.
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