Based on calculations done by Nuvama Alternative & Quantitative Research, the inclusions to the MSCI indices could bring in inflows from foreign investors worth $2 billion for domestic equities. ‘’The May review will entail another action-packed rejig as we anticipate close to $2 billion inflow into India,” said the financial services company in its report on Tuesday.
Stocks to be included in MSCI index
At least 12 stocks could be included in MSCI global standard index. The list includes Indus Towers, Phoenix Mills, Policy Bazaar, Sundaram Finance, NHPC, Bosch,Solar Industries, Jindal Stainless, Mankind Pharma, Torrent Power, JSW Energy and Canara Bank. According to estimates done by Nuvama Research, these stocks are expected to attract inflows between $144 -$224 million.
At $224 million, the highest inflow is likely to come in for Indus Towers, as per the report. Thermax Ltd is sitting on the borderline to receive an inclusion in the MSCI index. If its inclusion is conducted, the stock can see inflows worth $139 million.
“We maintain our belief that India’s ascent in the EM pack will continue to astound skeptics and reward believers in the India Story. As of now, India’s stock count in the MSCI Standard Index/EM Index is 136, and we anticipate it to reach closer to 150 by the forthcoming May review,” said Abhilash Pagaria, Head – Nuvama Alternative & Quantitative Research.
Also Read: Japan’s MSCI Weighting Lead Over China Rises to Five-Year High
Stocks that may get excluded from MSCI index
Nuvama also named Paytm, Indraprastha Gas, and Berger Paints as stocks that are likely to get excluded from the index. If it does happen, these stocks can see combined outflows of around $283 million, with Berger Paints pulling the maximum at $111 million, according to Nuvama.
MSCI Smallcap index
Nuvama estimates that the MSCI Smallcap index is likely to see addition of 14 smallcap names Waaree Renewable Tech, Vedant Fashions, VA Tech Wabag, RR Kabel, Sanghvi Movers, DOMS Industries, Time Technoplast, Dynamatic Tech, Inox India, Transformers and Rectifiers, Puravankara, Juniper Hotels, Tips Industries and Shriram Pistons.
On the other hand, smallcaps stocks including Tatva Chintan, Borosil, Rajratan Global, Sharda Cropchem and Dreamfolks will likely be excluded from the index. The pre-emptive price action in most of the names are already factored in.
Overview
As of May 13 , 2024, India’s weight in the MSCI EM index stands closer to 18 per cent, a significant leap from just around eight per cent in early 2020. ‘’By the second half of 2024, we anticipate crossing the 20 per cent threshold in the EM index,” said Nuvama in its report on Tuesday. This means that India’s representation in the EM index has more than doubled from the depths of the COVID-19 pandemic in March 2020, underscoring its appeal as one of the world’s fastest-growing economies with potential for solid earnings growth.
This has been possible due to India’s standardized foreign ownership Limit (FOL) in 2020, robust performance by Indian equities, particularly in the midcap segment, leading to numerous inclusions in every review, and the relative underperformance by other EM packs, especially China.
With a consistent flow from domestic institutional investors and now if steady foreign institutional investors participation resumes, there is potential for India to surpass the 20 per cent weightage in the MSCI EM index by second half of 2024 itself, according to Nuvama Alternative & Quantitative Research.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Published: 14 May 2024, 09:58 PM IST
