MSCI will announce index changes for February on Tuesday. As per Nuvama Alternative & Quantitative Research, India could see close to $800 million to $1 billion passive inflows from foreign portfolio investors (FPIs).
The country holds about 17.8 per cent representation in the MSCI EM Index, which may inch up to 18.5 per cent following the February rejig.
The likely names to be included in the MSCI Global Standard Index in the February review are NMDC, Punjab National Bank, BHEL, Union Bank of India, NHPC and Jindal Stainless.
- Also read: India gains heft in MSCI EM index
The MSCI Smallcap Index may see the inclusion of Cello World, Honasa Consumer, Jaiprakash Associates, DB Realty and Inox Wind Energy.
India’s representation in the MSCI EM pack held steady at around 8 per cent from 2015 until October 2020. However, since November 2020, the country has more than doubled its representation.
Multiple factors
This is due to multiple factors such as India’s standardised foreign ownership limit, robust performance by Indian equities and the relative underperformance by other EM packs, especially China.
In 2023, India’s stock count in the MSCI Standard index rose to 131, with the inclusion of a net of 17 Indian stocks over the past four reviews. This marks an improvement from 2022, when only nine Indian stocks were included. The notable factors contributing to this increase include India’s substantial rally vis-a-vis other emerging markets and MSCI’s shift from semi-annual to quarterly rebalancing for stock inclusions and exclusions.
Consistent flows from domestic institutions and steady FPI participation may help India surpass a 20 per cent weightage in the MSCI EM Index by early 2024, according to Nuvama.