MSCI India rejig: JM Financial sees 3 inclusions, 2 exits & $1.4 bn inflows | Markets News

MSCI India rejig: India could see three additions and two exclusions in the upcoming MSCI India Standard Index review in November, potentially resulting in net passive inflows of around $1.4 billion, according to JM Financial Institutional Securities. 

In a report dated October 22, the domestic brokerage said that its analysis identifies Life Insurance Corporation of India (LICI) and new-age stock Meesho as high-probability additions to the MSCI India Standard Index in this review cycle. 

Both names are above the adequate free-float-adjusted market cap and MSCI’s minimum size threshold, JM Financial analyst Abhishek Kumar said.

Additionally, it identifies Coforge as a “high-probability candidate” to migrate to the MSCI India Standard Index from the Small Cap Index in this review cycle. 

On the flip side, it expects Oracle Financial Services Solutions (OFSS) and Siemens Energy India to be excluded from the MSCI India Standard index amid persistent deterioration in free-float market cap owing to fundamental pressures and structurally low free-float, which would drag them below the minimum size or liquidity threshold stipulated for continued index membership.

The brokerage suggested that the impact on inclusion names can play out due to active institutional positioning. Historical evidence suggests 8-15 per cent cumulative excess returns in the 20 trading days preceding MSCI announcements for high-conviction inclusion candidates, while exclusion candidates may face accelerated selling pressure as the announcement date approaches. Liquidity management is key for affected holders, Kumar noted.

On aggregate, the high-probability inclusions and exclusions could drive passive inflows into India of about $1.9 billion and outflows of approximately $497 million, resulting in a net positive passive inflow of roughly $1.4 billion. 

Disclaimer: Views and outlook in this report belong to the brokerages and analysts cited. They do not reflect the views of Business Standard. Readers are advised to exercise discretion.