MSCI rejig may see Rs 8,300 crore inflow in six stocks

Global index services provider MSCI has included six Indian stocks in its standard index as part of its semi-annual review while excluding one stock. Stocks such as ABB India, Bajaj Holdings & Investment, Indian Hotels, Tube Investment, TVS Motors, and Varun Beverages are the new entrants in MSCI Standard Index.

The changes in constituents for the MSCI global standard indices will take place on 30 November. These changes are expected to result in flows between $132 million and $ 207 million into these six stocks by the end of this month, according to an estimate by IIFL Alternative Research.

These stocks may remain under foreign fund managers’ radar over the coming weeks, which may give near-term appreciation in share prices.

Tube Investment and Indian Hotels could see an inflow of $207 million each when the stocks are included on November 30, said IIFL. Indian Hotel rallied 44% in the last six months, while Tube Investment gained 54% during this period.

Varun Beverages and TVS Motors are expected to see an inflow of $187 million and $176 million, respectively. The other two stocks, Bajaj Holdings and ABB India will likely see an inflow of $ 132 million and $118 million, respectively, during the MSCI rejig later this month.

MSCI indices are widely tracked globally, with several passive funds replicating their portfolios in line with stock weightages. These funds must buy or sell if a stock's weight in the index is increased or reduced.

According to analysts, the stocks largely languish or lower single-digit gains during the MSCI announcement date and from the announcement date to the adjustment date.

“On adjustment day, 52% of the time stocks have settled flat while 48% of the time they have closed in red, indicating the higher rebalance volume is matched by the selling flow of hedge fund and event traders,” said Abhilash Pagaria, head, Nuvama Alternative & Quantitative Research.

“One month and two months after the rebalance, on an average, 60% of the time, stocks have settled with losses. Baring Adani Group of stocks, most of the other inclusion names have traded in a narrow range up until six months post-rebalance,” he added.