The review is likely to be completed by Oct and the changes may take effect a month later
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The MSCI Standard Index for India is likely to include six stocks in November, potentially attracting $1 billion of foreign funds into these stocks, according to an analysis by Edelweiss Alternative Research.
The broking firm expects SRF Ltd, Mphasis Ltd, Mindtree Ltd, IRCTC Ltd, Zomato Ltd and Godrej Properties Ltd to join the index as part of the review. The index review is likely to be completed by the last week of October and the changes may take effect in November.
Out of the six, four are technology companies. If all of them join the index, the weight of technology sector in MSCI Standard Index (India) can rise from 18.2% to 19.5% by 30 November, Edelweiss said.
With a strong line-up for digital and new economy initial public offerings (IPOs), Edelweiss expects the weight of technology sector to continue to rise as most of these prominent names can make early entry into the MSCI index.
“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," said Abhilash Pagaria, analyst, Edelweiss Alternative Research in a report.
Separately, quarterly recapping and rebalancing of stocks in Nifty is due on Wednesday.
Edelweiss Alternative Research estimates a major increase in weight of HDFC Life Insurance Company Ltd in Nifty, leading to an inflow of $23 million, JSW Steel Ltd ($4.6 million), and Bharat Petroleum Corporation Ltd ($2.7 million). The broking firm also expects outflow of funds worth $4.4 million in Reliance Industries Ltd, $3.5 million in Infosys Ltd and $2.2 million in Tata Consultancy Services due to reduction in their weightage.
In Nifty Bank, it expects recapping in all the constituents, and key impact is expected in State Bank of India ($104 million) and Axis Bank ($58.7 million) while key outflows are likely to be 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 factor of stocks in all NSE Indices is realigned due to change in equity, investible weight factor (IWF), replacement of scrips in the index, periodic rebalancing and on a quarterly basis on the last trading day of March, June, September and December. The review takes into account closing prices as on T-3 basis, where T day is last trading day of March, June, September and December.
BSE Ltd will review and rejig the Sensex index in December, cut-off for which is 29 October. The broking firm sees Wipro Ltd replacing Bajaj Auto Ltd in the index. Wipro’s inclusion may fetch $151.4 million but drain out $75.6 million due to Bajaj Auto’s removal.
“After global index MSCI, even domestic benchmark Sensex can witness rise in weightage of the technology sector," said Pagaria.
In September, Indian equities received a net inflow of $1.53 billion through foreign institutional investors’ net buying while it is $8.69 billion for the full year so far.
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