MSCI rebalancing exercise likely to drive $1 billion in domestic stocks

Despite the positive trigger, shares of NHPC, NMDC, PNB and Bhel fell sharply on Monday amid a broad-based selling in shares of PSUs

Domestic markets could get inflows of around $1 billion on account of the latest MSCI rebalancing exercise, according to Nuvama Alternative & Quantitative Research. The brokerage expects half a dozen stocks to be added to the MSCI global standard index. These include NHPC (estimated inflows of $223 million), NMDC ($186 million) and Punjab National Bank ($180 million) and Bharat Heavy Electricals, or BHEL, ($156 million).

The global index provider was expected to announce the changes before the market opens on Tuesday. Despite the positive trigger, shares of NHPC, NMDC, PNB, and BHEL fell sharply on Monday amid a broad-based selling in shares of public sector undertakings (PSUs). NHPC tanked nearly 16 per cent, meanwhile NMDC, PNB, and BHEL fell close to 5 per cent each. Analysts said most of the inclusion candidates are on expected lines and the news has already got priced in. They said there could be some price action on the day of inclusion.

The adjustment date for index MSCI rebalancing is set for February 29. “India could see close to $1 billion of passive inflow from foreign investors and PSUs are leading the charts for inclusions in the February review. India currently holds approximately 17.8 per cent representation in the MSCI EM Index, and following the February rejig, we anticipate India’s representation to move around 18.5 per cent,” said Abhilash Pagaria, Head, Nuvama Alternative & Quantitative Research. 

At the end of December 2023, India’s weighting in the MSCI Emerging Market index stood at 16.73 per cent — second-most among the index constituents after China’s 26.53 per cent.