MSCI May review: Canara Bank, JSW Energy, NHPC included; Paytm excluded

In its May review, MSCI excluded three Indian companies – One 97 Communications, Berger Paints India and Indraprastha Gas, from the index.

India's weight in key MSCI equity index hits another high (File Image)

MSCI Inc (Morgan Stanley Capital International) has included 13 domestic stocks including Canara Bank, JSW Energy, Mankind Pharma and NHPC in its Global Standard Index, resulting in an increase in the country’s weight in the index to close to 19 per cent from the current 18.3 per cent.

MSCI indexes are globally tracked by investors who allocate funds based on the weightage given to countries and stocks.

With addition of these stocks to the MSCI Global Standard/Emerging Market (EM) Index, the country is expected to witness a net inflow of upwards of $2.5 billion in FII (foreign institutional investor) passive flows, according to Abhilash Pagaria, Head – Nuvama Alternative & Quantitative Research.

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All changes in the MSCI Global Standard Index will be implemented as of the close of May 31, MSCI Inc said in a statement.

The increase in India’s weight, in terms of basis points, in the index is the highest among any EM Index in this rejig, Pagaria said. China, with a weight of 25.7 per cent and 703 members, has the highest representation in the MSCI EM Index.

“India’s representation in the MSCI EM pack held steady at around 8 per cent from 2015 until October 2020. However, since November 2020, we have more than doubled our representation, currently standing at 18.3 per cent,” he said.

The rise in the country’s weight in the index is due to India’s standardised Foreign Ownership Limit (FOL) in 2020; robust performance by Indian equities, particularly in the midcap segment, leading to numerous inclusions in every review; and relative underperformance by other EM packs, especially China.

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“We should anticipate many more inclusions in the EM Index. We are still at the tip of the iceberg. With a consistent flow from DII (domestic institutional investors) and now if steady FII participation resumes, there is potential for India to surpass a 20 per cent weight in the MSCI EM Index by the second half of 2024 itself,” Pagaria said.

The other India stocks that are added to the MSCI Global Standard Index include Bosch, Indus Towers, Jindal Stainless, PB Fintech, Phoenix Mills, Solar Industries India, Sundaram Finance, Thermax and Torrent Power.

With 13 inclusions and three 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 the country’s total stock count in the small-cap index to 497.

In its May review, MSCI excluded three Indian companies – One 97 Communications, Berger Paints India and Indraprastha Gas, from the index.