Fund flow of $1 billion likely if these 6 stocks included in MSCI index: Study

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The rejig of MSCI Standard Index is likely to allow inflow of $1 billion of foreign funds into India, according to an analysis by Edelweiss Alternative Research. If the stocks of six companies — SRF Ltd, Mphasis Ltd, Mindtree Ltd, IRCTC Ltd, Zomato Ltd and Godrej Properties Ltd — join the index, MSCI Standard Index (India) will rise from 18.2% to 19.5%, the broking firm said. Of the six companies, four are tech based. The review of MSCI index is likely to be concluded by November 30.

The broking firm said it expects, given the thrust on digital and new economy Initial Public Offerings (IPOs), the technology sector to continue to improve as most of these stocks are likely to make an early entry into the MSCI index.

How rejig will impact fund flows

The Mint, which published some findings of the report, quoted Abhilash Pagaria, analyst, Edelweiss Alternative Research, as saying, “After the listing of digital IPOs and once the lock-in period for pre-IPO investors come to an end, all the newly added names in Index from upcoming listings will see higher free float, which will simultaneously lead to increase in the weightages of those stocks in the index.”

The broking firm in its report expected a big rise in the weight of HDFC Life Insurance in Nifty, leading to an inflow of $23 million, JSW Steel Ltd ($4.6 million), and Bharat Petroleum Corporation Ltd ($2.7 million). Edelweiss Research also anticipated an outflow of funds, given the reduction in their weightage, worth $4.4 million in Reliance Industries, $3.5 million in Infosys Ltd and $2.2 million in Tata Consultancy Services.

In the Nifty, Edelweiss sees recapping in all constituents and a major impact in State Bank of India ($104 million) and Axis Bank ($58.7 million). It expected outflows in HDFC Bank ($82 million), Federal Bank ($9.1 million) Bandhan Bank ($10.9 million), IndusInd Bank ($ 39 million), AU Small Finance Bank (13.7 million) and Punjab National Bank ($6.4 million).

The capping of stocks in the NSE indices is realigned because of change in equity, replacement of scrips in the index, periodic rebalancing. On a quarterly basis on the last trading day of March, June, September and December, and due to the Investible Weight Factor (IWF). The recapping is done considering the closing prices on a T-3 basis. Edelweiss expected Bajaj Auto Ltd to be replaced by Wipro Ltd in the index.