MSCI India Index Rejig: Paytm Out, Indus Towers In; $2.5B FII Inflow Expected

The MSCI India Index has undergone notable changes in its May review, with 13 additions and 3 deletions announced on May 15. Among the key adjustments, Paytm parent One97 Communications finds itself excluded from the Global Standard index, while entities like Indus Towers, PB Fintech, and Phoenix Mills have secured entries.

The impending adjustments, set to take effect on May 31, are projected to prompt a substantial net inflow of over $2.5 billion in Foreign Institutional Investor (FII) passive flows, according to Nuvama Alternative & Quantitative Research.

PB Fintech emerges as a frontrunner among the 13 stocks included in the MSCI Global Standard index, anticipated to witness inflows of $283 million.

Following closely, Sundaram Finance is expected to attract $243 million, with NHPC, Phoenix Mills, and Indus Towers also poised to see significant inflows ranging between $216 and $234 million each.

Conversely, Paytm faces estimated outflows worth $70 million after its exclusion, alongside Berger Paints and Indraprastha Gas, making them vulnerable to outflows of $117 million and $113 million, respectively, as highlighted by Nuvama Alternative.

Although ousted from the Global Standard index, Paytm and Indraprastha Gas find a place in the MSCI India Smallcap Index in this review, alongside 29 additions and 15 deletions in total.

Noteworthy additions to the Smallcap index include Aditya Birla Sun Life AMC, Doms Industries, RR Kabel, and Va Tech Wabag, among others. This influx of 29 additions is projected to drive cumulative inflows worth $273 million.

"The adjustments are slated for May 31, and India is expected to witness a net inflow of upwards of USD 2.5 billion in FII passive flows. With 13 inclusions and 3 exclusions, the net stock count post-rejig will be 146 for India in the MSCI Standard/EM Index. Additionally, there will be a net inclusion of 14 stocks in the small-cap index, bringing India's total stock count in the small-cap index to 497." Abhilash Pagaria Nuvama Alternative and Quantitative Research.

"I remain extremely bullish on India, especially with active participation from mutual funds and HNIs and retailers in the Indian equity markets. We should anticipate many more inclusions in the EM Index. We are still at the tip of the iceberg." Nuvama Alternative and Quantitative Research.

Comparatively, China leads the MSCI EM index with a weight of 25.7 percent and 703 members, while India holds a weight of 18.3 percent with 136 stocks.

"India has once again achieved a major milestone in this rejig, as its representation in the MSCI EM Index is set to increase from the current 18.3% to closer to 19%. This increase in weight, in terms of basis points, is the highest among any EM Index in this rejig" Nuvama added.

The latest MSCI India Index rejig reflects a dynamic market landscape, with emerging trends and shifting investor sentiments driving significant portfolio adjustments. As India's economic potential continues to attract global attention, such recalibrations serve as markers of evolving market dynamics and investment opportunities.