MSCI adds 12 Indian stocks to global standard indices; $4 billion of fund inflows expected

Global index provider MSCI (Morgan Stanley Capital International) today announced the addition of 12 Indian stocks to its global standard indices while removing two others. The change comes as a part of its semi-annual index review and will be effective from December 1. With this, domestic brokerage and research firm Motilal Oswal expects $4.1 billion dollars of fund inflows into domestic equity markets. The biggest beneficiary of the 12 inclusions will be Kotak Mahindra Bank.

Among the twelve additions to the index are ACC, Adani Green Energy, Apollo Hospitals, Balkrishna Industries, IPCA Laboratories, Kotak Mahindra Bank, Larsen & Toubro Infotech, MRF, Muthoot Finance, PI Industries, Trent, and Yes Bank. The two securities to have been excluded from the global standard indices are BOSCH and LIC Housing Finance. Motilal Oswal expects Kotak Mahindra Bank to see inflows worth $797 million, while Adani Green could see inflows worth $335 million. Yes Bank is a surprise addition to MSCI’s Global Standard Indices and it could see inflows worth $ 184 million. Apollo Hospitals and MRF could be the other largest beneficiaries in terms of inflows. 

MSCI also reduced the weightage of some big-wigs like Reliance Industries, HDFC Bank, and Infosys. Analysts are expecting roughly $100-125 million worth of outflows from each of these domestic heavyweights by the end of this month. 

Other changes by MSCI include the addition of Adani Green, L&T Infotech, Muthoot Finance, PI Industries, and Yes Bank to MSCI India Domestic index and the deletion of BOSCH and LIC Housing Finance from the same. Additionally, MSCI has also made changes to the MSCI India Domestic Smallcap Index. Here, eighteen securities will be added while seven will be removed. Some marquee names that will be added to the index include, Aarti Drugs, Aditya Birla Capital, Mindspace Business parks REIT, Vaibhav Goyal, and Zydus Wellness. GE Power and Future Lifestyle Fashions are among those stocks that will be removed from the index.

The changes come after MSCI, earlier last month, announced that it will implement changes in Foreign Ownership Limits (FOL) in the MSCI Global Indexes containing Indian securities. Depository institutions such as CDSL and NSDL had, in the beginning of April this year, increased the foreign ownership limit for all listed companies to their sectoral limits. Global brokerage firms like Morgan Stanley and Citi see Kotak Mahindra Bank as the biggest beneficiary of the change with fund inflows expected to be northwards of $500 million