HAL, Max Health Care to be included in MSCI

The market is eagerly awaiting the rejigging in the MSCI.  The index is a global composite index and considered a benchmark for fund allocation by passive funds like ETFs. That’s why the change in weightage of stocks in this leads to the inflow or outflow of funds from the stock.

Some shares are expected to be added, for some weightage will change, and some will get excluded. Basically, the inclusion and changes in weightage in the index depend on factors related to free float (How many shares are available for trading) and market capitalisation.

Let’s look at those shares. HAL is expected to become part of MSCI index. Morgan Stanley expects $175 mn inflow, Nuvama expects $190 mn inflow due to inclusion. This is expected after LIC sold its stake in the company.

Besides this,  Max Health Care, Cummins India and Ashok Leyland are also expected to become part of a standard index from the small-cap index.

As per Morgan Stanley, Max Healthcare can have ($256Mn inflow), Cummins India ($141Mn inflow), and Ashok Leyland ($154Mn inflow). MSCI is a global index and inclusion in it leads to higher inflow in stocks.

Besides new inclusion, it is expected that for some companies weightage will be increased. For Kotak Mahindra Bank its foreign room is increased to 25%. Hence adjustment factor is increased from 0.5 to 1. It means higher weightage and inflow in the stock. Morgan Stanley expects $745Mn inflow. While IIFL estimates an inflow of $750Mn.

Except for Kotak, the weightage of Indigo and Samvardhan Motherson will also be increased as their promoters have sold their stake. Morgan Stanley believes Indigo will have an inflow of $28m while Samvardhan Motherson is estimated to witness an inflow of $18m.

Besides this Nuvama expects that Indus Tower might be excluded from the index and due to this there can be an outflow of $83 million from the stock.