MSCI May rejig could attract $2 billion inflows; Indus Towers, PB Fintech, Mankind Pharma likely inclusions

Adjustments to the MSCI indices will come into effect from May 31.

The May review of the MSCI indices is slated to take place on May 15, with the adjustments coming into force on May 31. Based on calculations done by Nuvama Alternative & Quantitative Research, the inclusions to the MSCI indices could usher inflows worth $2 billion for domestic equities.

Stocks like Indus Towers, PB Fintech, Phoenix Mills, Sundaram Finance, Mankind Pharma and others are the key contenders to get a pass into the MSCI Standard index. In contrast, Nuvama sees Paytm, Indraprastha Gas, and Berger Paints as the possible exclusions.

The contenders

Some stocks that emerge as high conviction contenders to be included in the MSCI Global Standard index include Indus Towers, PB Fintech, Phoenix Mills, Sundaram Finance, Solar Industries India, NHPC, Bosch, Jindal Stainless, Torrent Power, Mankind Pharma, JSW Energy, and Canara Bank.

Among these, Nuvama anticipates the maximum flow coming in for Indus Towers at $224 million, followed by PB Fintech and Phoenix Mills at $223 million and $213 million, respectively. For others, flows of around $144-207 million are estimated.

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On the other hand, Thermax is seen sitting on the borderline to receive an inclusion in the MSCI index, Nuvama believes. If its inclusion goes through, the stock can see inflows worth $139 million.

Nuvama also named Paytm, Indraprastha Gas, and Berger Paints as stocks that have a high conviction of getting excluded. If it does happen, these stocks can see combined outflows of around $283 million.

As for the MSCI Small-cap index, Nuvama expects stocks such as Waaree Renewable, Vedant Fashions, Va Tech Wabag, RR Kabel, Sanghvi Movers, among others to receive an inclusion. On the flipside, Tatva Chintan Pharma, Borosil, Sharda Cropchem, and Dreamfolks Services are likely to be excluded.

India's rise

As of now, India's stock count in the MSCI Standard index and the Emerging Market index stands at a cumulative 136, and Nuvama Alternative & Quantitative Research anticipates it to reach closer to 150 by the forthcoming review.

As of May 13, India's weight in the MSCI Emerging Market Index stands closer to 18 percent, marking a significant leap from just around 8 percent in early 2020."By the second half of 2024, we anticipate crossing the 20 percent threshold in the Emerging Market index," Nuvama forecasted.

Abhilash Pagaria, head, Nuvama Alternative & Quantitative Research, attributed India's rise in the MSCI EM space to the country's standardised Foreign Ownership Limit in 2020, robust performance by Indian equities, particularly in the midcap segment, and the relative underperformance by other EM packs, especially China.

Read More | Canara Bank, Voltas among 18 stocks likely to enter MSCI India index in May rejig

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