MSCI rebalancing could see addition of three Indian stocks, two deletions

Tata Elxsi, Jindal Steel seen as inclusion candidates; move could see a churn of Rs 6,900 crore by funds tracking the index

Three domestic stocks could get added, while two could get removed during global index provider MSCI’s semi-annual index review (SAIR) next month. The move could see a churn worth $900 million (Rs 6,900 crore) by funds tracking the MSCI index.

According to analyst Brian Freitas, who publishes on Smartkarma, Tata Elxsi, Jindal Steel Power and Adani Power are the leading contenders to get added to the MSCI index. This could result in inflows of $280.8 millon (Rs 2,150 crore) in Tata Elxsi, $215.3 million (Rs 1,649 crore) in Jindal Steel Power and $196.1 million (Rs 1,502 crore) in Adani Power.

Meanwhile, HDFC Asset Management Company is likely to get deleted from the index, resulting into selling to the tune of $ 107 million (Rs 820 crore) by passive funds. State-owned Indraprastha Gas is another exclusion candidate, however, the possibility of that happening is low.

Abhilash Pagaria of Edelweiss Alternative & Quantitative Research predicts the weightage of Reliance Industries to go up in the MSCI index. This is on the back of conversion of its partly paid-up shares to ordinary shares in November 2021.

 

“Domestic Indices (Nifty and Sensex) have already made the adjustments and now we are expecting MSCI to take the same into account in the May Review. The ballpark inflow could be around $200 million (Rs 1,500 crore),” he said.

MSCI is scheduled to announce the results of the May 2022 SAIR on May 12. The changes announced will be implemented at the close of trading on May 31.

Overall, 52 stocks could get added and 80 could get deleted, with China expected to see maximum changes –37 additions and 46 deletions. Indonesia, which has been the best-performing emerging market (EM) on a year-to-date basis, is expected to see five additions and zero deletions, as per Freitas.

At the end of November 2021, 106 domestic stocks were part of the MSCI EM and India’s weightage in the index was around 12.3 per cent. The MSCI EM index captures large and mid-cap representation across 25 emerging markets. It has 1,420 constituents and covers about 85 per cent of the free float market cap in each country. Over $400 billion in assets under management (AUM) are said to be benchmarked to the MSCI EM index.