MSCI November Rejig: Indian equities to see $2.5 billion in inflows, spotlight on HDFC Bank

Names like BSE, Voltas, Alkem Laboratories, Kalyan Jewellers and Oberoi Realty will now be a part of MSCI Global Standard Index following its latest rejig.

The quarterly rejig in the Morgan Stanley Capital International (MSCI) indices is slated to occur later today, November 25. According to experts, Indian equities are expected to witness a net inflow of around $2.5 billion in FII passive flows. Banking bellwether HDFC Bank will also be in the limelight, as its weightage in the index is slated to increase.

With five inclusions and no exclusions, the net stock count post-rejig will be 156 for India in the MSCI Standard/EM Index. Additionally, there will be a net inclusion of 13 stocks in the Smallcap Index, bringing India's total stock count in the small-cap index to 525.

"India has once again achieved a major milestone in this rejig, as its representation in the MSCI EM Index is set to increase from the current 19.3 percent to closer to 19.8 percent. This increase in weight, in terms of basis points, is the highest among any EM Index in this rejig," according to Nuvama Institutional Equities.

Currently, China sees the highest representation in the MSCI EM Index, with a weight of 27 percent and 598 members in the index. India's weightage in the index is 19.3 percent, with 151 stocks.

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Names like BSE, Voltas, Alkem Laboratories, Kalyan Jewellers and Oberoi Realty will now be a part of MSCI Global Standard Index following its latest rejig.

Voltas is projected to attract the highest inflow, likely above $300 million, while BSE shares could see inflows nearing $260 million, as per Nuvama Institutional Equities.

Others including Kalyan Jewellers, Oberoi Realty and Alkem Labs are likely to garners passive inflows to the tune of $241 million, $215 million and $201 million, respectively, Nuvama estimated.

Shares of Voltas, BSE, Kalyan Jewellers, and Oberoi Realty all traded with gains between 2-5 percent on November 25, ahead of the rebalancing.

Nuvama Institutional Equities had expected that Adani Energy would be included, however, MSCI provided a detailed explanation for not considering the stock, citing low confidence about the stock's free float. Further, the index provider has reduced the float in two other Adani group entities, Adani Green Energy and Adani Power.

However, the limelight will be on HDFC Bank, as the anticipated weightage for the private lender could draw inflows of around $1.88 billion. MSCI had previously announced an increase in HDFC Bank's weightage in its previous August rejig, opting to implement the adjustment in two stages rather than a one-time boost.

13 more stocks will also be added to the MSCI India Smallcap Index. These include Eureka Forbes, Signature Global, Aadhaar Housing Finance, Indegene, PC Jewellers, and DCM Shriram, with expected inflows ranging between $3 million and $7 million, according to Nuvama Alternative. In total, these inclusions could draw total inflows of around $71 million.

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