Synopsis:
The latest MSCI rejig reflects shifting market dynamics with key additions and exclusions across indices. Increased index weightage and inflows highlight strong investor confidence and India’s rising global market presence, though some stocks may face short-term selling pressure from reduced representation.
MSCI’s latest index review added four stocks and removed two from its India Standard Index, reflecting evolving market dynamics. Such reshuffles often drive short-term volatility as investors realign portfolios to match index composition, influencing fund flows and stock momentum.
The MSCI (Morgan Stanley Capital International) Index is a globally recognized benchmark for tracking equity market performance across various regions and sectors. It provides investors with a comprehensive measure of stock market trends, facilitating comparisons and investment decisions based on the performance of constituent stocks.
New entrant
The MSCI rejig brings Fortis Healthcare, Paytm, GE Vernova T&D, and Siemens Energy India into the Standard Index, signaling growing investor confidence in these firms. Meanwhile, Tata Elxsi and CONCOR’s downgrade to the Smallcap Index suggests relative underperformance or reduced market capitalization within the evolving market landscape.
As per Nuvama Alternative & Quantitative Research, the four newly added stocks, including Fortis, are expected to attract inflows ranging from $252 million to $436 million, whereas the two excluded stocks could witness outflows of up to $162 million following the MSCI index reshuffle.
Additionally, the latest MSCI reshuffle not only adjusts stock inclusions and exclusions but also revises weightages eight stocks gain while six lose. India’s representation in the MSCI Standard Index slightly increases to 15.6% from 15.5%, with total constituents rising to 163. The move signals continued investor confidence and India’s growing prominence in global equity benchmarks.
Inflow & Outflow
According to Nuvama Alternative, several stocks are set to gain from higher MSCI index weightage. Asian Paints leads with expected inflows of ($95 million), followed by Apollo Hospitals ($41 million), Lupin ($35 million), and SRF ($34 million). Suzlon Energy ($30 million), Yes Bank ($28 million), Alkem Labs ($27 million), and Jubilant Foodworks ($15 million) are also poised to benefit, reflecting strong investor confidence.
On the other hand, some stocks facing a reduction in MSCI index weightage may witness notable outflows. Samvardhana Motherson could see outflows of ($53 million), followed by Dr. Reddy’s Laboratories ($51 million), REC ($47 million), and Zydus Lifesciences ($45 million). Bharat Forge ($31 million) and Colgate-Palmolive India ($29 million) may also experience selling pressure as investors rebalance portfolios post-reshuffle.
In the latest MSCI rejig, ACC, Honeywell Automation, Leela Palaces Hotels, and Blue Jet Healthcare were added to the India Smallcap index, while several names like Restaurant Brands Asia, Rain Industries, Raymond, Balaji Amines, and Quess Corp were excluded.
Written by Abhishek Singh
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