India count in MSCI EM index now at 131 | Mint

India count in MSCI EM index now at 131

Since global fund managers use MSCI indices to allocate funds to emerging markets, the rise in weight may attract over $1.5 billion from passive trackers of this index. (Reuters)
Since global fund managers use MSCI indices to allocate funds to emerging markets, the rise in weight may attract over $1.5 billion from passive trackers of this index. (Reuters)

Summary

Country’s weight rises to 16.3%; index rejig may attract $1.5 bn

MUMBAI : Global index provider MSCI has included nine Indian stocks in its MSCI Standard Index in the latest round of rebalancing, which will take India’s representation in the emerging market (EM) index to the highest-ever count of 131 stocks. The rebalancing, which will lead to minor cuts in the weights of some big names, could result in India attracting passive inflows of $1.5 billion after the changes take effect on 30 November.

“With this fresh inclusion, India’s representation on the EM index will reach an all-time high, marking a significant increase, with its weight doubling over the past three years," said Abhilash Pagaria, head, Nuvama Alternative & Quantitative Research.

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Graphic: Mint

The inclusion of IndusInd Bank, Suzlon Energy, Persistent Systems, APL Apollo Tubes, Polycab India, Tata Motors, Macrotech Developers, Paytm ( One 97 Communications) and Tata Communications will see India’s weight in the index rise to around 16.3%, up from 15.9% currently. Suzlon, Persistent Systems and APL Apollo have migrated from the Small-cap Index to the Standard Index.

Since global fund managers use MSCI indices to allocate funds to emerging markets, the rise in weight may attract over $1.5 billion from passive trackers of this index, Pagaria said.

Suzlon, Tata Motors and Paytm traded up between 2% and 4% during the day, following news of the inclusion.

To adjust for the country weighting in the index after the fresh inclusion, leading companies such as Reliance Industries, ICICI Bank, Infosys and HDFC Bank could witness minor weight reductions and consequent outflows between $100 million and 200 million each, according to Pagaria.

Apart from the Standard Index, the MSCI Small-cap Index has also seen inclusions of the likes of SJVN, Gokaldas Exports, PTC India and Hindustan Construction Co.

MSCI India has outperformed the MSCI EM Index, rising 4.7% over the past one year through 13 November, against the latter’s 0.87% decline, according to Bloomberg data. “India’s earnings have been the driving force behind the increase in share prices, which have led to India’s weighting increase doubling on MSCI," said Rajesh Palviya, derivatives and technical head at Axis Securities.

For the 42 Nifty firms that have declared results, earnings are up 35% versus Motilal Oswal Financial Services’ expectations of 30%.

Similarly, for the 185 companies which have declared results in MOFSL coverage universe, earnings are up 58% versus its expectations of 53%.

MSCI undertakes quarterly index reviews in February, May, August and November.

Indian markets have risen to record highs of 20,222.45 on the Nifty and 67,927.23 on the Sensex due to strong domestic and FPI participation. DIIs have invested 79,686 crore in Indian shares so far this fiscal year, while FPIs have net invested 1.2 trillion.

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