FIIs record 3rd highest single-day inflow ever on MSCI rejig

Representative image.

Foreign institutional investors (FIIs) recorded the third highest single-day net inflow into Indian equities at Rs 9,010.41 crore in the last session of November 2022, NSE data available on Bloomberg showed.

The flow was the highest since February 24, 2021, when FIIs recorded highest ever inflow at Rs 28,739.17 crore. The second largest single-day inflow was on April 21, 2015 at Rs 17,488.73 crore.

Analysts were expecting inflows to be high given MSCI India semi-annual resignation became effective from November 30. IIFL Alternative Research earlier in the day estimated an inflow of $582 million (Rs 4,735 crore) due to this.

The inflow usually comes as exchange traded funds and other passive funds tracking an index rebalance their portfolio. This leads to massive buying in stocks that are included and selling in those that are excluded.

Tube Investment, Indian Hotels, Varun Beverages, TVS Motor, Bajaj Holdings and ABB India were among the stocks that were included into MSCI Global Standard Index. Zomato saw an increase in weight.

Meanwhile, 20 stocks saw reduction in their weight in the index that included Infosys, ICICI Bank, HDFC, TCS, HCL Tech, SBI, ITC, Maruti Suzuki, Kotak Mahindra Bank, among others.

“Historically, post-adjustment, in one month and two month period after the rebalance, on an average, 60 percent of the times stocks (inclusion names) have settled with losses,” said Abhilash Pagaria, Nuvama Alternative & Quantitative Research, which was earlier known as Edelweiss. “Barring Adani Group of stocks, most of the other inclusion names have traded in a narrow range up until six months post-rebalance.”

With a massive last day investment, the total FII investment during November rose to Rs 22,546.32 crore. This flow has been a significant driving force behind Sensex and Nifty hitting fresh highs.

While FIIs were busy buying, domestic institutional investors (DIIs) offloaded shares. They net sold shares worth Rs 4,056 crore, the seventh highest ever outflow, according to NSE data available on Bloomberg. For the month, they net sold shares worth Rs 6,301 crore.