The MSCI index reshuffle is set to put several Indian stocks in focus today, with investors expected to make portfolio adjustments ahead of the revised weightages taking effect from 1 September. The changes announced on 13 August will be reflected in trades at Monday’s close, potentially driving a surge in trading volume and stock-specific volatility, particularly during the final minutes of the session.
According to Reuters report, traders said concentrated buying and selling could trigger sharp price movements, particularly in stocks with relatively low liquidity.
The MSCI rebalancing will be the first major test of India’s new closing auction session (CAS), according to Arun Kejriwal, founder of Kejriwal Research and Investment Services.
“This MSCI rebalance is the first real litmus test for the CAS. We could again see some ‘chaos’ in individual stocks,” Kejriwal said, according to Reuters.
Introduced on 3 August, the CAS is a roughly 20-minute auction in which buy and sell orders are matched to determine a stock’s official closing price. Similar closing auction mechanisms are used in several global and Asian markets, including China, Taiwan, Hong Kong and South Korea.
The new system replaced the earlier methodology, under which a stock’s closing price was determined by the average price of trades executed in the final 30 minutes of continuous trading.
Four stocks added to MSCI index
The latest MSCI rebalancing will add four Indian companies — Laurus Labs, Lenskart, Adani Energy Solutions and Groww — while Balkrishna Industries, SBI Cards and Astral will be removed from the index.
The reshuffle will also reduce the weight of Reliance Industries, while increasing the weight of Adani Enterprises.
According to a report by Nuvama Alternative and Quantitative Research, the latest MSCI rebalancing is expected to trigger significant passive fund flows across several Indian stocks, with both index additions and changes in weightages driving large inflows and outflows.
Laurus Labs, Lenskart among major inflow beneficiaries
Among the stocks being added to the MSCI index, Laurus Labs is expected to attract the highest inflow of around $598 million, followed by Lenskart at $352 million.
Adani Energy Solutions is estimated to see inflows of $310 million, while Groww could attract around $256 million. Collectively, the four additions are expected to draw approximately $1.516 billion in inflows.
Balkrishna Industries, SBI Cards face outflows
Three stocks are set to be removed from the index, potentially triggering passive fund outflows. Balkrishna Industries is expected to see the largest outflow at around $169 million, followed by SBI Cards at $143 million and Astral at $138 million.
Together, the three stocks could see total outflows of around $450 million, according to Nuvama.
Eternal, Adani Enterprises to benefit from higher weights
MSCI is also increasing the weightages of seven stocks, which is expected to result in additional inflows.
Eternal is projected to attract the largest inflow at around $674 million, followed by Adani Enterprises at $202 million and Adani Ports at $77 million.
JSW Energy could see inflows of $34 million, while Adani Power is expected to attract $28 million. GMR Airports and Swiggy are estimated to see inflows of $22 million and $13 million, respectively.
The seven stocks together are expected to receive around $1.050 billion in additional inflows.
Reliance Industries faces highest outflow
Meanwhile, MSCI’s reduction in the weightages of five stocks could result in further passive fund outflows.
Reliance Industries is expected to see the largest outflow at around $523 million, followed by Jio Financial Services at $61 million. Indian Hotels could see an outflow of $32 million, while Aditya Birla Capital and Colgate-Palmolive are estimated to see outflows of $21 million and $16 million, respectively.
The five stocks are collectively expected to see outflows of around $653 million, according to the Nuvama report.
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