Recently-listed IREDA, Cello World, Honasa Consumer Products and Signature Global are among the top contenders likely to make it to the MSCI Smallcap index, according to Nuvama Alternative & Quantitative Research. MSCI will make the official announcement on February 13, with adjustments set to take place on February 29.
According to Nuvama, the other probable inclusions to MSCI Smallcap index include Jaiprakash Associates, RR Kabel, KPI Green Energy, Protean e-gov, Swan Energy, J Kumar Infraprojects, RattanIndia Power, Time Technoplast, Ethosa, Sandur Manganese, Kesoram Industries, Sai Silks Kalamandir, Fedbank and DB Realty.
These stocks have rallied anywhere between 10-100 percent in the past three months making their free float-adjusted market capitalisation eligible for inclusion. According to Nuvama's calculation, IREDA's inclusion could bring $11 million worth passive inflows into the stock while other stocks could see $2-7 million of inflows each.
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Inclusion or increase in stock weightage in global indices like MSCI and FTSE leads to inflows from passive funds, which track that index. Exclusion from these indices usually leads to outflows. Thus, the announcements are widely tracked.
MSCI Standard Index
Jindal Stainless, BHEL, Punjab National Bank, NMDC and Oberoi Realty are currently qualifying for inclusion into MSCI Standard index.
"The current market prices need to hold up for inclusion. Once included, the stocks could see $130-150 million of passive inflows each," said Abhilash Pagaria, Head, Nuvama Alternative & Quantitative Research.
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Some other strong contenders for inclusion into MSCI Standard index are Alkem Labs, Prestige Estates, Union Bank of India and Solar Industries. However, these stocks need to rally another 2-6 percent from current levels, said Pagaria.
Similarly, Dalmia Bharat, NHPC, GMR Airports, FSN E-Commerce Ventures, Canara Bank, Mankind Pharma, Bosch and Vodafone Idea can also make it to the MSCI Standard index if the stocks rally between 8-20 percent.
"If these stocks don't see upside momentum before Feb announcement, they can be strong candidates for May review," added Pagaria. MSCI has set the cut-off period for Feb announcement between January 18 and 31.
When it comes to exclusions, Indraprastha Gas could drop off the index if it falls 3-4 percent from current market price. Currently, it is safe, said Nuvama.
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India now commands a 17.1 percent share in the MSCI emerging market index compared to 8 percent in October 2020. In the previous rejig, MSCI included nine Indian stocks in MSCI Standard Index, which included IndusInd Bank, Suzlon Energy, Persistent Systems and Paytm parent One97 Communications among others.
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