RVNL, Oil India, Vi among 7 stocks to be added to MSCI EM Index; to attract $3 bn inflows

Global index services provider Morgan Stanley Capital International (MSCI) has announced changes for the August 2024 rejig of the MSCI Global Standard Index, with India continuing to secure a significant share in the emerging markets landscape. India’s weightage in the MSCI EM Index has surged from around 8% in 2020 to a record 20% today amid a bull market over the past few years, driven by economic growth and structural inflows. This happened even as foreign institutional investors (FIIs) were consistently withdrawing from EMs and India, while retail investors remained confident in India's growth story.

With all the adjustments in the EM Pack, India’s tentative weight will come close to 20%, which may lead to a net FII passive inflow of $2.7 billion to $3 billion, according to Nuvama Alternative & Quantitative Research. It added that India could potentially cross 22% by year-end, citing the current pace and momentum in the domestic equity market.

As part of the restructuring, as many as seven Indian stocks will be added to MSCI Global Standard Index for emerging markets, while one stock will be removed. Rail Vikas Nigam Ltd (RVNL), Vodafone Idea, Dixon Technologies (India), Oil India, Oracle Financial, Prestige Estates, and Zydus Lifesciences will be included in the MSCI Global Standard Index, under its August review. However, Bandhan Bank will be excluded from the index.

RVNL and Zydus Lifesciences will be added to largecap section of the MSCI emerging markets index, while Vodafone Idea, Oil India, Oracle Financial, and Prestige Estates to be included in the midcap section of the index, as per the August 2024 Index Review for the MSCI Equity Indexes. Besides, Dixon Technologies have been upgraded from smallcap to midcap space of the MSCI emerging markets index.  

Overall, 27 securities will be added to and 96 securities will be deleted from the MSCI ACWI Index, which captures large and mid cap representation across 23 developed markets (DM) and 24 emerging markets (EM) countries. These changes will be implemented as of the close of August 30, 2024, MSCI said in a release on Monday.

For HDFC Bank, the weight increase will take place in two tranches.  The first increase in its weightage in the MSCI indices will happen after the current review, while the second one will take place after the November review.

“For HDFC Bank, the long-awaited weight increase is finally happening. MSCI has made an exception by raising with lower adjustment factor, leading to an inflow of $1.8 billion, equivalent to 93 million shares, with an impact of about 4.5 days in August Rejig. The remaining float adjustment (second and final tranche) is expected (officially been communicated) to be done in the November 2024 rejig, provided the foreign room remains at least 20%, which we believe should not pose a problem,” says Abhilash Pagaria, Head, Nuvama Alternative and Quantitative Research.

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