MSCI adjustments may fetch $350 million FII money into India
- India is expected to see a net inflow of $350 million through the foreign institutional investors (FII) route following an adjustment by MSCI in its global standard indices
India is expected to see a net inflow of $350 million through the foreign institutional investors (FII) route following an adjustment by MSCI in its global standard indices.
In the semi-annual review released on Wednesday, six Indian stocks were added, and one was removed from the MSCI Global Standard Index, while there are slight weight reductions in a few heavyweight stocks in other indices.
“According to our estimates and calculations, the addition of stocks in the index will see a net flow of approximately $300-350 million foreign institutional investor (FII) money to India. The inflows in the top three small-cap names could be $15-18 million each, while in others, it could be $7-8 million. There will be weight reductions in a few names, which will result in outflow,” said Abhilash Pagaria, Edelweiss Securities.
The flow of FII money to Indian equities has taken a hit in the last two months as the stress of the pandemic and the severe health crisis caused by the second wave have threatened economic recovery. Data showed that FIIs sold shares worth $1.77 billion in the past two months, with an outflow of $282.51 million in May so far.
The six stocks added in the MSCI India index are Adani Enterprises, Adani Total Gas, Adani Transmission, Bharat Electronics, Cholamandalam Investment, and SBI Cards and Payments. Zee Entertainment Enterprises has been deleted from the MSCI India index.
The inclusion of Adani Enterprises could fetch $318 million, Adani Total Gas $310 million, Adani Transmission $285 million, Bharat Electronics $149 million, Cholamandalam Investment $196 million, and SBI Cards and Payments $237 million, according to Edelweiss estimates. The removal of Zee Entertainment Enterprises may result in the outflow of $140 million in FII money.
In the MSCI Global Small Cap indexes, 33 stocks have been added while five have been removed. Newly listed stock Burger King India, Computer Age Management (CAMS), Indigo Paints, Route Mobile and Indian Railway Catering and Tourism Corporation are among the stocks added to the index.
Some of the top companies such as Reliance Industries will see an outflow of $90 million, Infosys $83 million, TCS $90 million, UltraTech Cement $83 million, Vedanta $74 million, HDFC Ltd $70 million, and Tata Steel $50 million, as there will be weight reductions, Pagaria said.
The world’s largest index compiler has also made changes in all its equity indices. All the changes will be implemented as of 27 May 2021.
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