MSCI rejig today: PNB, NMDC, BHEL, Union Bank and GMR shares to see $804 million inflows

The adjustments to MSCI Global Standard Index will take place today, with India likely to see over $1.2 billion in inflows over time, as passive funds align their portfolios to changes. Punjab National Bank, NMDC, Bharat Heavy Electricals Ltd (BHEL), Union Bank of India and GMR Airports Infra are five stocks that are seen attracting a total $804 million in passive inflows due to inclusions.

Zomato Ltd, DLF, MRF, Hindalco Industries, InterGlobe Aviation (IndiGo), Dr Reddy’s Labs and  Paytm are also seen attracting up to $89 million in passive inflows each due to increased MSCI weightages.

PNB shares may see $187 million in inflows, followed by NMDC ($161 million), BHEL ($165 million), Union Bank ($147 million) and GMR Airports ($144 million), as per Nuvama estimates.  This brokerage sees Zomato ($89 million), DLF ($72 million), MRF ($40 million), IndiGo ($37 million) and Hindalco ($32 million) shares to attract decent inflows.

Changes to MSCI Smallcap Index may attract inflows for IREDA, Honasa Consumer, JP Associates, DB Realty and  MSTC among others.

India's representation in the MSCI EM pack held steady at around 8 per cent from 2015 until October 2020. But since November 2020, India has nearly doubled its representation, currently standing at 17.9 per cent.

“This remarkable achievement can be attributed to multiple factors: I) India's standardized Foreign Ownership Limit (FOL) in 2020. II) Robust performance by Indian equities, particularly in the Midcap segment, leading to numerous inclusions in every review. III) Relative underperformance by other EM packs, especially China,” Nuvama said.

In 2023, India's stock count in the MSCI Standard index has risen to 131, with the inclusion of a net of 17 Indian stocks over the past four reviews.

This, Nuvama said, marks an improvement from 2022, where only a net of 9 Indian stocks were included.  “The notable factors contributing to this increase in 2023 include India's substantial rally compared to other Emerging Markets and MSCI's shift from semi-annual to quarterly rebalancing for stock inclusions/exclusions. With a consistent flow from DII and now if steady FII participation resumes, there is potential for India to surpass a 20 per cent wt. in the MSCI EM Index by early 2024 itself,” Nuvama said.