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The MSCI India Index underwent significant changes in its May review, with 13 additions and 3 deletions, as announced on May 15. Notably, Paytm’s parent company, One97 Communications, was removed from the Global Standard Index, while Indus Towers, PB Fintech, and Phoenix Mills were added.
These adjustments, set to take effect from May 31, are expected to lead to a net inflow of over $2.5 billion in FII passive flows, according to Nuvama Alternative & Quantitative Research.
Who’s In and Who’s Out?
PB Fintech is projected to see the highest inflows of $283 million among the 13 stocks added to the MSCI Global Standard Index, followed by Sundaram Finance with $243 million. NHPC, Phoenix Mills, and Indus Towers are likely to attract inflows between $216 million and $234 million. Bosch, Canara Bank, Jindal Stainless, JSW Energy, Mankind Pharma, Solar Industries, Thermax, and Torrent Power are expected to garner inflows ranging from $154 million to $185 million each.
On the flip side, Paytm’s exclusion from the Global Standard Index is anticipated to result in outflows of $70 million. Berger Paints and Indraprastha Gas, also excluded, may face outflows of $117 million and $113 million, respectively. However, Paytm and Indraprastha Gas will join the MSCI India Smallcap Index, which saw 29 additions and 15 deletions.
Other notable additions to the Smallcap Index include Aditya Birla Sun Life AMC, Doms Industries, RR Kabel, Va Tech Wabag, Tips Industries, Gillette India, HUDCO, and Puravankara. These additions are expected to drive cumulative inflows worth $273 million.
Among the major exclusions from the Smallcap Index are Indoco Remedies, Polyplex Corp, Alok Industries, Rajratan Global Wire, and Dreamfolks Services.
India’s Growing Influence
Nuvama Alternative projects that India’s weight in the MSCI Emerging Market (EM) Index will increase to 20 percent in the second half of 2024. With this latest rejig, India’s representation in the MSCI EM Index is set to rise from 18.3 percent to nearly 19 percent. This increase in weight is the largest among any EM Index in this reshuffle.
Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research, remains highly optimistic about India, especially given the active participation from mutual funds and HNI/retail investors in the Indian equity markets. “We should anticipate many more inclusions in the EM Index. We are still at the tip of the iceberg,” Pagaria stated.
Currently, China holds the highest representation in the MSCI EM Index with a weight of 25.7 percent and 703 members, compared to India’s 18.3 percent weight with 136 stocks.
