MSCI rebalancing sees markets slumping 1.5% in late trade
According to Nuvama Quantitative and Alternative Research, the excluded stocks are expected to trigger passive outflows between $136 million and $281 million, while the inclusions are seen attracting inflows between $209 million and $491 million.
Among other changes, big names such as Hindustan Unilever, Bajaj Finance, and TCS saw their weightages trimmed on the Global Standard index. These stocks could see passive outflows between $140 million and $204 million, according to IIFL Capital.
The rebalancing of the MSCI’s Global Standard index, that came into effect on Friday, triggered a late sharp selloff in the Indian stock markets, causing the benchmark indices to slump around 1.5%.
India’s weightage on the marquee global index fell marginally to 12.3% from 12.4% earlier as the changes took effect.
Despite the weightage being broadly stable, such index rejigs trigger short-term pressure on the market as global investors rebalance their portfolios based on the changes. The MSCI Global Standard index is a benchmark that is tracked by global investors, and thus inclusions and exclusions can lead to a sharp change in flows.
In the latest set of changes, the likes of Federal Bank, Multi Commodity Exchange of India, National Aluminium, and Indian Bank were added to the Global Standard index, while Hyundai Motor India, Jubilant Foodworks, Kalyan Jewellers, and Rail Vikas Nigam were chopped off.
According to Nuvama Quantitative and Alternative Research, the excluded stocks are expected to trigger passive outflows between $136 million and $281 million, while the inclusions are seen attracting inflows between $209 million and $491 million.
According to IIFL Finance, 27 stocks are expected to see outflows of up to $20 million, 16 stocks may witness outflows between $30 million-$50 million, and 8 stocks may see outflows between $50 million-$80 million.
“The MSCI rebalancing is expected to generate significant trading activity during the closing auction session. Investors should expect elevated volumes and sharp price movements in stocks affected by the index changes,” the firm said.
As these changes came into effect, the BSE’s Sensex index, which was down around 0.4% or 338.66 points, tanked 843 points during a 10-minute window to eventually end the session down 1,092.05 points or 1.4% at 74,775.74.
The NSE’s Nifty 50 index also saw a similar slump, ending the session down 1.5% at 23,547.75.
“The pressure intensified during the final hours of trade after the MSCI Global Standard Index rebalancing came into effect, triggering heightened volatility in select stocks amid expected passive fund flow adjustments and portfolio rebalancing activity,” said Siddharth Khemka, head of research of wealth management at Motilal Oswal Financial Services.
Among other changes, big names such as Hindustan Unilever, Bajaj Finance, and TCS saw their weightages trimmed on the Global Standard index. These stocks could see passive outflows between $140 million and $204 million, according to IIFL Capital.
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