HAL, PFC lead race for MSCI index, Adani Total, Kotak Bank in focus too

Analysts predict both PSU stocks to rake in huge passive inflows; Adani Transmission and Indus Towers could get removed from index

State-owned firms Hindustan Aeronautics (HAL) and Power Finance Corporation (PFC) are seen as the top contenders to enter the MSCI Standard indices during their quarterly rebalancing exercise next month. Analysts predict both stocks to rake in huge passive inflows on account of the MSCI addition.

Analyst Brian Freitas of Periscope Analytics, who publishes on Smartkarma, expects inflows of $230 million (nearly Rs 1,900 crore) in HAL and another $167 million (Rs 1,370 crore) in PFC.

Meanwhile, Adani Transmission could get removed from the MSCI index, which will result in selling to the tune of $230 million from passive trackers. Indus Towers too could get removed, which will result in passive outflows of $74 million (Rs 600 crore).

The cutoff date for determining stocks to be included and excluded from the MSCI indices is anywhere between April 17 and April 28, said analysts. The global index provider will announce changes to its indices on May 11 and the changes will get implemented on May 31.

Another two stocks that are likely to be in focus are Adani Total Gas (ATGL) and Kotak Mahindra Bank (KMB).

ATGL will see outflows as its reduction will be cut in the MSCI index as a few of its foreign portfolio investors (FPIs) are getting categorised as non-free float.

“This change was scheduled for February but was deferred to May as the stock kept trading limit down. We expect passive MSCI trackers will need to sell 8.8 million shares ($98 million) at the close on May 31,” said Freitas.

On the other hand, KMB is expected to see huge inflows as the legroom for foreign investors in the counter has gone past 25 per cent, which will lead to an increase in its weightage.

“Following an increase in foreign room to higher than 25 per cent, the Limited Investability Factor on KMB should be removed at the May rebalancing. This should result in passive trackers needing to buy 42.6 million shares ($980 million) of Kotak Mahindra Bank (KMB IN) at the close on May 31,” added Freitas.